Economy
9:13 am
Mon November 26, 2012

Income Inequality a Growing Problem in Pennsylvania

Much like the rest of the nation, Pennsylvania has experienced a widening gap between the wages earned by low-income and higher-income people over the last decade. A report from the left leaning Keystone Research Center and Pennsylvania Budget and Policy Center found that between the late 1990s and mid-2000s, the annual incomes of the richest fifth of Pennsylvania households grew by 7.2 percent, the incomes of the richest 5 percent grew 11.3 percent.

“What we have seen is that the poorest, lowest-income households have seen their incomes decline. Folks in the middle of the income distribution haven’t done much better. They’ve managed to eke out a small gain, but really more or less gained no ground,” said Mark Price, labor economist with Keystone.

The lowest-income bracket saw wages drop by 7.9 percent, and middle-income earners saw an increase of 1.9 percent. Price said that’s troubling because a strong economy depends upon growth from the middle out.

“An economy that has very broad-based wage growth, so that folks at the bottom and in the middle see their wages rise over time – we haven’t seen that. What we have seen is folks on the bottom falling behind, and folks in the middles struggling to just keep pace,” he said.

The national and state economies are driven largely by people having money to spend, but Price added, that gets harder for families to do when their wages don’t keep up with inflation, and they have a harder time making ends meet.

One of the recommendations to close narrow the wage gap is to reform the state’s tax system so that low-income people aren’t paying a higher portion of their income in taxes than the wealthy. But changes like that take political action and are often tricky – some opponents of higher taxes for top earners feel that penalizes people who worked hard to get where they are. Price said that’s not the case.

“The vast majority of people in our society, they do work and they do work quite hard,” he said, “I think what we’re all concerned about is that increasingly, especially with rising inequality, people at the top are earning windfall profits and windfall gains, this isn’t necessarily a story of someone working harder than a janitor or someone at a manufacturing plant.”

Other suggestions to narrow the wage gap include raising the minimum wage, make education and work training more accessible to lower and middle-income people, and protecting supports for low-income workers like nutrition and housing assistance and skills training.