Income Inequality News ArticlesExcerpts of Key Income Inequality News Articles in Media
Chief executive pay has roared back after two years of stagnation and decline. America's top bosses enjoyed pay hikes of between 27 and 40% last year, according to the largest survey of US CEO pay. The dramatic bounceback comes as the latest government figures show wages for the majority of Americans are failing to keep up with inflation. America's highest paid executive took home more than $145.2m, and as stock prices recovered across the board, the median value of bosses' profits on stock options rose 70% in 2010, from $950,400 to $1.3m. The news comes against the backdrop of an Occupy Wall Street movement that has focused Washington's attention on the pay packages of America's highest paid. The survey, the most extensive in the US, covered 2,647 companies, and offers a comprehensive assessment of all the data now available relating to 2010 pay. This year's survey shows CEO pay packages have boomed: the top 10 earners took home more than $770m between them in 2010. As stock prices began to recover last year, the increase in CEO pay outstripped the rise in share value. The Russell 3000 measure of US stock prices was up by 16.93% in 2010, but CEO pay went up by 27.19% overall. For S&P 500 CEOs, the largest companies in the sample, total realised compensation – including perks and pensions and stock awards – increased by a median of 36.47%. Total pay at midcap companies, which are slightly smaller than the top firms, rose 40.2%.
Note: For key reports on income inequality from reliable sources, click here.
Federal employees whose compensation averages more than $126,000 and the nation’s greatest concentration of lawyers helped Washington edge out San Jose as the wealthiest U.S. metropolitan area, government data show. The U.S. capital has swapped top spots with Silicon Valley, according to recent Census Bureau figures, with the typical household in the Washington metro area earning $84,523 last year. The national median income for 2010 was $50,046. The figures demonstrate how the nation’s political and financial classes are prospering as the economy struggles with unemployment above 9 percent and thousands of Americans protest in the streets against income disparity, said Kevin Zeese, director of Prosperity Agenda, a Baltimore-based advocacy group trying to narrow the divide between rich and poor. “There’s a gap that’s isolating Washington from the reality of the rest of the country,” Zeese said. “They just get more and more out of touch.” In recent years Washington has attracted more lobbyists and firms with an interest in the health-care overhaul and financial regulations signed into law by President Barack Obama. “Wall Street has moved to K Street,” said Barbara Lang, president and chief executive officer of the DC Chamber of Commerce, referring to the Washington street that’s home to prominent lobbying firms.
A widening gap between rich and poor is reshaping the U.S. economy, leaving it more vulnerable to recurring financial crises and less likely to generate enduring expansions. Left unchecked, the decades-long trend toward increasing inequality may ... shake social stability, economists and financial-industry executives say. “Income inequality in this country is just getting worse and worse and worse,” James Chanos, president and founder of New York-based Kynikos Associates Ltd., told Bloomberg Radio this week. “And that is not a recipe for stable economic growth when the rich are getting richer and everybody else is being left behind.” Since 1980, about 5 percent of annual national income has shifted from the middle class to the nation’s richest households. That means the wealthiest 5,934 households last year enjoyed an additional $650 billion -- about $109 million apiece -- beyond what they would have had if the economic pie had been divided as it was in 1980, according to Census Bureau data. Disputes over what constitutes economic fairness are moving to center stage amid a near-stagnant U.S. economy saddled with 9.1 percent unemployment yet boasting record corporate profits.
Note: For key reports from major media sources on income inequality in the US and worldwide, click here.
While the poor and middle class fight for us in Afghanistan, and while most Americans struggle to make ends meet, we mega-rich continue to get our extraordinary tax breaks. Some of us are investment managers who earn billions from our daily labors but are allowed to classify our income as “carried interest,” thereby getting a bargain 15 percent tax rate. Others own stock index futures for 10 minutes and have 60 percent of their gain taxed at 15 percent, as if they’d been long-term investors. Last year my federal tax bill — the income tax I paid, as well as payroll taxes paid by me and on my behalf — was $6,938,744. That sounds like a lot of money. But what I paid was only 17.4 percent of my taxable income — and that’s actually a lower percentage than was paid by any of the other 20 people in our office. Their tax burdens ranged from 33 percent to 41 percent and averaged 36 percent. If you make money with money, as some of my super-rich friends do, your percentage may be a bit lower than mine. But if you earn money from a job, your percentage will surely exceed mine — most likely by a lot. My friends and I have been coddled long enough by a billionaire-friendly Congress. It’s time for our government to get serious about shared sacrifice.
Note: The author of this article is Warren Buffett, one of the richest people in the world. Thanks for the excellent article, Warren.
As millions of procrastinators scramble to meet [the] tax filing deadline, ponder this: The super rich pay a lot less taxes than they did a couple of decades ago, and nearly half of U.S. households pay no income taxes at all. The [IRS] tracks the tax returns with the 400 highest adjusted gross incomes each year. The average income on those returns in 2007, the latest year for IRS data, was nearly $345 million. Their average federal income tax rate was 17 percent, down from 26 percent in 1992. The top income tax rate is 35 percent, so how can people who make so much pay so little in taxes? There are so many breaks that 45 percent of U.S. households will pay no federal income tax for 2010, according to estimates by the Tax Policy Center, a Washington think tank. In all, the tax code is filled with a total of $1.1 trillion in credits, deductions and exemptions, an average of about $8,000 per taxpayer, according to an analysis by the National Taxpayer Advocate, an independent watchdog within the IRS.
Note: For other revealing media articles showing how the rich keep getting richer, usually at the expense of the rest of us, click here.
The nation’s workers may be struggling, but American companies just had their best quarter ever. American businesses earned profits at an annual rate of $1.659 trillion in the third quarter, according to a Commerce Department report. That is the highest figure recorded since the government began keeping track over 60 years ago. The next-highest annual corporate profits level on record was in the third quarter of 2006, when they were $1.655 trillion. Corporate profits have been doing extremely well for a while. Since their cyclical low in the fourth quarter of 2008, profits have grown for seven consecutive quarters, at some of the fastest rates in history. As a share of gross domestic product, corporate profits also have been increasing, and they now represent 11.2 percent of total output. That is the highest share since the fourth quarter of 2006, when they accounted for 11.7 percent of output.
Note: Long-term unemployment is at a record high, yet corporations are raking in record profits. With record profits, why aren't corporations hiring more new employees? For many reports from reliable souces on corporate profiteering, click here.
U.S. companies are rebounding quickly from the recession and posting near-historic profits, the result of aggressively re-tooling their operations to cope with lower revenue and an uncertain outlook. An analysis by The Wall Street Journal found that companies in the Standard & Poor's 500-stock index posted second-quarter profits of $189 billion, up 38% from a year earlier and their sixth-highest quarterly total ever, without adjustment for inflation. For all U.S. companies, the Commerce Department estimates second-quarter after-tax profits rose to an annual rate of $1.208 trillion, up 3.9% from the first quarter and up 26.5% from a year earlier. That annual rate is the highest on record, though it doesn't account for inflation. As a percentage of national income, after-tax profits were the third-highest since 1947, surpassed only by two quarters in 2006, near the peak of the last economic expansion. The data indicate that big companies are recovering from the downturn faster and more strongly than the overall economy, helping send stock prices higher this year. To achieve that performance, companies laid off hundreds of thousands of workers, closed less-profitable units, shifted work to cheaper regions and streamlined processes. Despite the hefty profits, executives aren't expected to boost spending on new employees, products and equipment anytime soon. "We've focused on permanent changes that won't have to be undone as sales improve," said John Riccitiello, chief executive of Electronic Arts.
Note: For highly revealing reports on income inequality, click here.
Missing from almost all discussion of America’s dizzying rate of unemployment is the brute fact that hourly wages of people with jobs have been dropping, adjusted for inflation. Average weekly earnings rose a bit this spring only because the typical worker put in more hours, but June’s decline in average hours pushed weekly paychecks down at an annualized rate of 4.5 percent. In other words, Americans are keeping their jobs or finding new ones only by accepting lower wages. Meanwhile, a much smaller group of Americans’ earnings are back in the stratosphere: Wall Street traders and executives, hedge-fund and private-equity fund managers, and top corporate executives. As hiring has picked up on the Street, fat salaries are reappearing. We’re back to the same ominous trend as before the Great Recession: a larger and larger share of total income going to the very top while the vast middle class continues to lose ground. And as long as this trend continues, we can’t get out of the shadow of the Great Recession. When most of the gains from economic growth go to a small sliver of Americans at the top, the rest don’t have enough purchasing power to buy what the economy is capable of producing.
Note: The author of this analysis, Robert Reich, is a former U.S. Secretary of Labor. For highly informative graphs showing the details of rising wealth inequality in the United States, click here.
Economists warn that Britain is wobbling on a tightrope over a second recession where spending cuts would precipitate more unemployment and risk sinking the economy into a downward spiral. So far Labour has failed to find the words to express public outrage at the financiers' billowing wealth while the Treasury is drained. Only weeks since launching, the campaign for a Robin Hood tax on all financial transactions has gathered extraordinary support. It hasn't been hard, so profound is the untapped public anger at the bankers. This week the European parliament voted for it overwhelmingly – 536 to 80 – supported by the social democrats and the majority conservative EPP grouping: opponents were the ECP rump rightwingers the Tories belong to. Backed here by some 100 organisations from Oxfam to the Salvation Army, rarely has a campaign gathered such momentum in so short a time: 140,000 have joined and more gather by the day. Campaigners want a sterling transaction tax to come in at once. Imposing just 0.005% on every sterling deal is within Britain's sole control, raising Ł4bn. If the EU agrees a wider financial transactions tax, it would bring Britain another Ł4bn – one estimate is Ł100bn across Europe, to be used at home, in foreign aid and on climate change.
Note: See http://robinhoodtax.org.uk to support this rapidly growing movement which may make a big difference.
For most of the past 70 years, the U.S. economy has grown at a steady clip, generating perpetually higher incomes and wealth for American households. But since 2000, the story is starkly different. The past decade was the worst for the U.S. economy in modern times, a sharp reversal from a long period of prosperity. It was, according to a wide range of data, a lost decade for American workers. The decade began in a moment of triumphalism -- there was a current of thought among economists in 1999 that recessions were a thing of the past. By the end, there were two, bookends to a debt-driven expansion that was neither robust nor sustainable. There has been zero net job creation since December 1999. No previous decade going back to the 1940s had job growth of less than 20 percent. Economic output rose at its slowest rate of any decade since the 1930s as well. Middle-income households made less in 2008, when adjusted for inflation, than they did in 1999 -- and the number is sure to have declined further during a difficult 2009. The Aughts were the first decade of falling median incomes since figures were first compiled in the 1960s. And the net worth of American households ... has also declined when adjusted for inflation, compared with sharp gains in every previous decade since data were initially collected in the 1950s.
Note: For revealing reports from major media sources on the realities of the economic crisis, click here.
Patients who lack health insurance are more likely to die from car accidents and other traumatic injuries than people who belong to a health plan -- even though emergency rooms are required to care for all comers regardless of ability to pay. An analysis of 687,091 patients who visited trauma centers nationwide from 2002 to 2006 found that the odds of dying from injuries were almost twice as high for the uninsured than for patients with private insurance, researchers reported in Archives of Surgery. The research team from Harvard University and Brigham and Women's Hospital in Boston used information from 1,154 U.S. hospitals that contribute to the National Trauma Data Bank. The risk of death was 80% higher for patients without any insurance, the report said. The researchers also did a separate analysis of 209,702 trauma patients ages 18 to 30 because they were less likely to have chronic health conditions that might complicate recovery. Among these younger patients, the risk of death was 89% higher for the uninsured, the study found.
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The rich have been getting richer for so long that the trend has come to seem almost permanent. They began to pull away from everyone else in the 1970s. By 2006, income was more concentrated at the top than it had been since the late 1920s. The recent news about resurgent Wall Street pay has seemed to suggest that not even the Great Recession could reverse the rise in income inequality. But economists say — and data is beginning to show — that a significant change may in fact be under way. The rich, as a group, are no longer getting richer. Over the last two years, they have become poorer. And many may not return to their old levels of wealth and income anytime soon. Last year, the number of Americans with a net worth of at least $30 million dropped 24 percent. Few economists expect the country to return to the relatively flat income distribution of the 1950s and 1960s. Indeed, they say that inequality is likely to remain significantly greater than it was for most of the 20th century. In 2007, the top one ten-thousandth of households took home 6 percent of the nation’s income, up from 0.9 percent in 1977. It was the highest such level since at least 1913, the first year for which the I.R.S. has data. The top 1 percent of earners took home 23.5 percent of income, up from 9 percent three decades earlier.
Note: Two researchers into income inequality, Emmanuel Saez and Thomas Piketty, recently released a detailed report showing that income inequality in 2007, just before the real estate bubble burst and the financial crisis unfolded, was the highest since 1917. To read their report, "Striking it Richer: The Evolution of Top Incomes in the United States," click here. For analysis of the report, click here.
If companies don't ... focus on "internal equity" – how the highest paid executive's pay compares with that of everyone else in the organization – they risk losing their own staff's dedication and focus. Indeed, a bias to focus only on the external market in recent years has helped push executive compensation way out of whack. Because of the yawning gap between the leaders and the led, employee morale is suffering, talented performers' loyalty is evaporating, and strategy and execution is suffering at American companies. A smaller gap makes for greater solidarity, and as a result better performance, throughout the workplace. At Whole Foods, we've made adjustments to keep the external and internal equity perspectives in balance. We have a salary cap – the maximum allowable ratio of the highest cash compensation to average employee cash compensation. Today it's 19 to 1. The maximum cash compensation anyone can make at Whole Foods at about $650,000. Whole Foods has never lost to a competitor a top executive that we wanted to keep since the company began more than 30 years ago. The truth is that maximizing personal compensation is not the only motivation that people have in their work. We discover that once our basic material needs are satisfied, money becomes less important to us. In my experience, deeper purpose, personal growth, self-actualization, and caring relationships provide very powerful motivations and are more important than financial compensation for creating both loyalty and a high performing organization.
Note: This article was written by the CEO of Whole Foods, John Mackey. For more along these lines, see concise summaries of deeply revealing news articles on income inequality from reliable major media sources.
Despite the Wall Street meltdown, the nation's biggest banks are preparing to pay their workers as much as last year or more, including bonuses tied to personal and company performance. So far this year, nine of the largest U.S. banks, including some that have cut thousands of jobs, have seen total costs for salaries, benefits and bonuses grow by an average of 3 percent from a year ago, according to an Associated Press review. "Taxpayers have lost their life savings, and now they are being asked to bail out corporations," New York Attorney General Andrew Cuomo said of the AP findings. "It's adding insult to injury to continue to pay outsized bonuses and exorbitant compensation." That there is a rise in pay, or at least not a pronounced dropoff, from 2007 is surprising because many of the same companies were doing some of their best business ever, at least in the first half of last year. In 2008, each quarter has been weaker than the last. "There are, of course, expectations that the payouts should be going down," David Schmidt, a senior compensation consultant at James F. Reda & Associates. "But we haven't seen that show up yet." Some banks are setting aside large amounts. At Citigroup, which has cut 23,000 jobs this year amid the crisis, pay expenses for the first nine months of this year came to $25.9 billion, 4 percent more than the same period last year. Typically, about 60 percent of Wall Street pay goes to salary and benefits, while about 40 percent goes to end-of-the-year cash and stock bonuses that hinge on performance, both for the individual and the company.
Note: For lots more on the Wall Street bailout, click here.
Wall Street's five biggest firms are paying a record $39 billion in bonuses for 2007. It was a year when three of the firms suffered their worst quarterly losses in history and shareholders lost over $80 billion. Goldman Sachs, Morgan Stanley, Merrill Lynch, Lehman Brothers and Bear Stearns together awarded $65.6 billion in compensation and benefits last year to their 186,000 employees. That means year-end bonuses, at 60% of the total, exceeded the $36 billion distributed in 2006 when the industry reported all-time high profits. The firms have said they are eliminating at least 6,200 jobs amid mounting losses from the subprime mortgage mess. The payouts come as the economy slows, with unemployment rising, retail sales declining and new home foreclosures surging to a record. The industry's bonuses are larger than the gross domestic products of Sri Lanka, Lebanon or Bulgaria, and the average bonus of $219,198 is more than four times higher than the median U.S. household income in 2006, according to Census Bureau data. Shareholders in the securities industry endured their worst year since 2002, as Merrill and Bear Stearns slumped more than 40% and the CEOs at both firms gave up their jobs. Morgan Stanley fell 21% and Lehman dropped 16%. Only Goldman rose, gaining 7.9%.
Note: For lots more on escalating income inequality, click here.
The increase in incomes of the top 1 percent of Americans from 2003 to 2005 exceeded the total income of the poorest 20 percent of Americans, data in a new report by the Congressional Budget Office shows. The poorest fifth of households had total income of $383.4 billion in 2005, while just the increase in income for the top 1 percent came to $524.8 billion, a figure 37 percent higher. The total income of the top 1.1 million households was $1.8 trillion, or 18.1 percent of the total income of all Americans, up from 14.3 percent of all income in 2003. The total 2005 income of the three million individual Americans at the top was roughly equal to that of the bottom 166 million Americans, analysis of the report showed. Earlier reports, based on tax returns, showed that in 2005 the top 10 percent, top 1 percent and fractions of the top 1 percent enjoyed their greatest share of income since 1928 and 1929. Much of the increase at the top reflected the rebound of the stock market after its sharp drop in 2000, economists from across the political spectrum said. About half of the income going to the top 1 percent comes from investments and business. In addition, Congress in 2003 cut taxes on long-term capital gains and most dividends. Jared Bernstein, an economist at the Economic Policy Institute in Washington who characterizes the Bush administration’s policies as YOYO economics, based on You (Are) On Your Own, said the differences in income growth explained why so many Americans have told pollsters that they are feeling squeezed. “It is meaningless to middle- and low-income families to say we have a great economy because their economy looks so much different than folks at the top of the scale because this is an economy that is working, but not working for everyone.”
Note: For numerous other reliable media reports on worsening income inequality, click here.
Minimum-wage workers made $5.15 an hour when Harry Potter became a sensation a decade ago, and nothing more until July 24, three days after the final Harry Potter book release. [That] year, 1997, Business Week declared CEO pay was "out of control." Since then, CEO pay has gotten more out of control. Average CEO pay at the top 500 companies jumped 38 percent to $15.2 million in 2006 -- the year we broke the record for the longest period ever without a raise in the federal minimum wage. The ... minimum wage increase from $5.15 to $5.85 is so little, so late, that the minimum wage is still worth less than it was back in 1997, when it was $6.67 in today's dollars. Minimum-wage workers had more buying power when Wal-Mart founder Sam Walton opened his first Walton's 5 & 10 in 1951. CEOs make more in 90 minutes than minimum wage workers make in a year. The two longest periods in history without a minimum wage increase have occurred since 1980. Those long droughts without a raise have left minimum-wage workers in the dust. In 1980, the average CEO at a big corporation made as much as 97 minimum-wage workers. In 1997, the average CEO made as much as 728 minimum-wage workers. Last year, CEOs made as much as 1,419 minimum-wage workers. "As the productivity of workers increases, one would expect worker compensation to experience similar gains," a 2001 U.S. Department of Labor report observed. Instead, the gains have gone to record-breaking profits, CEOs and other have-mores. Between 1980 and 2006, worker productivity went up 70 percent, average worker wages went nowhere, the minimum wage fell 32 percent, and domestic corporate profits rose 256 percent, adjusting for inflation.
Income inequality grew significantly in 2005, with the top 1 percent of Americans — those with incomes that year of more than $348,000 — receiving their largest share of national income since 1928. The top 10 percent, roughly those earning more than $100,000, also reached a level of income share not seen since before the Depression. While total reported income in the United States increased almost 9 percent in 2005, the most recent year for which such data is available, average incomes for those in the bottom 90 percent dipped slightly compared with the year before, dropping $172, or 0.6 percent. The gains went largely to the top 1 percent, whose incomes rose to an average of more than $1.1 million each, an increase of more than $139,000, or about 14 percent. The new data also shows that the top 300,000 Americans collectively enjoyed almost as much income as the bottom 150 million Americans. The top group received 440 times as much as the average person in the bottom half earned, nearly doubling the gap from 1980. The disparities may be even greater. The [IRS] estimates that it is able to accurately tax 99 percent of wage income but that it captures only about 70 percent of business and investment income, most of which flows to upper-income individuals. For Americans in the middle, the share of income taken by federal taxes has been essentially unchanged across four decades. By comparison, it has fallen by half for those at the very top of the income ladder. [Incomes of] the top tenth of a percent and top one-hundredth of a percent ... soared by about a fifth in one year, largely because of the rising stock market and increased business profits.
So many super-rich Americans evade taxes using offshore accounts that law enforcement cannot control the growing misconduct, according to a Senate report that provides the most detailed look ever at high-level tax schemes. Cheating now equals about 7 cents out of each dollar paid by honest taxpayers, as much as $70 billion a year, the report estimated. "The universe of offshore tax cheating has become so large that no one, not even the United States government, could go after all of it," said Sen. Carl Levin, D-Mich., whose staff ran the investigation. The report details how the Quellos Group, a tax shelter boutique based in Seattle, "concocted a tax shelter" using $9.6 billion "worth of fake securities transactions that were used to generate billions of dollars of fake capital losses." When investigators asked for trading records, Levin said, they were first told the trades were private, over-the-counter transactions. He said investigators asked for trading tickets or other evidence of who owned the $9.6 billion worth of stock and were told the stocks were never owned by the parties involved. "They just wrote down numbers on paper and claimed losses," he said. "It was just like fantasy baseball, except the taxes not paid were for real."
Note: Up to $70 billion is lost to the U.S. Treasury each year, yet law enforcement "cannot control" the problem. Hmmmm. If just $10 million were directed to stop the losses, I suspect things might change and the investment would be paid back many fold. Could pressure from high places be preventing such an investigation?
New government data indicate that the concentration of corporate wealth among the highest-income Americans grew significantly in 2003, as a trend that began in 1991 accelerated in the first year that President Bush and Congress cut taxes on capital. In 2003 the top 1 percent of households owned 57.5 percent of corporate wealth, up from 53.4 percent the year before, according to a Congressional Budget Office analysis of the latest income tax data. The top group's share of corporate wealth has grown by half since 1991, when it was 38.7 percent. In 2003, incomes in the top 1 percent of households ranged from $237,000 to several billion dollars. For every group below the top 1 percent, shares of corporate wealth have declined since 1991. Long-term capital gains were taxed at 28 percent until 1997, and at 20 percent until 2003, when rates were cut to 15 percent. The top rate on dividends was cut to 15 percent from 35 percent that year. The White House said it did not believe that the 2003 tax cuts had much influence on wealth shares.
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