Income Inequality Spikes In State

$3,092,389: That’s the average yearly income for the top 1 percent of Connecticut households — 41 times what the average household in Connecticut makes.

These findings cpme from an annual report released Wednesday by Connecticut Voices for Children (CT Voices).

Titled ​“The State of Working Connecticut: Advancing Economic Justice in the Labor Market,” the paper focuses on increasing inequality and potential economic reforms.

A condensed version of the report can be found here.

The author of the paper, Patrick O’Brien, led a press call on Wednesday morning to discuss his findings.

“Our main focus was comparing national versus state data,” said O’Brien. He used census data, among other state indicators, to paint a foreboding picture of Connecticut’s economic trends.

According to the report, Connecticut has the third-highest level of pre-tax income inequality in the nation. ​“We already know that the U.S. has increasing economic inequality,” said O’Brien, ​“but this means the problem is even higher in Connecticut.” Economic inequality, he added, is at its highest levels since World War II.

The report emphasizes racial inequality: For pre-tax income, the median Black household earns 58 percent of what the median white household earns. The median Hispanic household earns 55 percent.

The study found larger income gaps between the ultra-rich and median households, as seen in the above chart.

Although both white and Black Americans had increased unemployment rates, Black Americans had a persistently higher rate even as the economy recovered. O’Brien found that the racial unemployment gap increased by 2.9 percentage points over the last year.

How We Got Here

“The biggest factor in this economic gap is the loss of worker power,” said O’Brien. Automation and outsourcing labor contributing, but only secondary, factors, O’Brien stated.

The loss of worker power, explained O’Brien, was brought on by the decline of unions and increase of shareholder influence.

This loss of power, he said, has been transmitted into a ​“prductivity pay gap.” Although workers had consistent levels of productivity, ​“they haven’t been paid in line with that productivity since the 1970s,” he said.n.

Asked why inequality os worse in Connecticut, O’Brien couldn’t be sure. ​“We tried to focus on the story of inequality in the U.S. as a whole and then highlight how it affected Connecticut,” he said. ​“But we didn’t do research into what’s causing the deviation between the state and national level.”

He added while the productivity pay gap probably drove both state and national trends, future research may find other unique factors.

What Next

“There are two sides to tackle,” said O’Brien. ​“For pre-tax income side, we want to fight for higher wages. On the post-tax income side, we want to establish a progressive tax.”

O’Brien thus focused on labor market and taxation policies, although he acknowledged these are not enough alone. ​“In the future, we’ll do reports on non-macro economic policies, like strengthening legal protections for labor unions.”

“There is no singular approach,” added CT Voices Executive Director Emily Byrne. ​“We must dismantle and re-build many policies.” 

On the state level, the report proposed a few policies to address the gap. It recommended that the state legislature ​“expand the Budget Reserve Fund and create a progressive tax system” to increase employment. Increasing employment is a surefire way to increase bargaining power, O’Brien said. ​“When companies are fighting to get employees, they are more likely to adhere to employee’s demands and raise wages.”

Second, the report proposed the state government ​“speed up the implementation date” of its new minimum wage and consider establishing a living wage.

The report also proposed federal policies, such as giving reparations to African Americans and using both fiscal and monetary policy to increase employment rates.

Although these policies will affect wealth redistribution in complex ways, the principle behind them is simple.

“When we spoke to community leaders across Connecticut about economic justice,” said Byrne, ​“most people wanted their children to have a promising future, one with more opportunities than they had.”