Income growth: If growth were inclusive, all workers would see their incomes rising, with the largest gains among lower-wage workers.
Insights & Analyses
- Since 1980, the incomes of the top earners (those at the 95th percentile) have grown more than the incomes of earners at the 20th percentile, and the 95/20 ratio of those incomes has grown.
- The average income for those in the 90th percentile of household incomes has increased by $24,895 since 1980 while average income for the 20th percentile has decreased by $1,756.
- Coastal states like Massachusetts and New Hampshire saw the most dramatic gains in earnings for high-wage and low-income workers.
- Among the top 100 largest US cities, San Francisco, CA, Jersey City, NJ, and Seattle, WA saw the largest increase in income for the 90th percentile and 20th percentile.
Drivers of Inequity
Reduced bargaining power among workers due to declines in union membership and corporate consolidation as well as a higher average unemployment rate have caused incomes for low-wage workers to grow more slowly than those of high-wage workers. Growing trade with low-wage countries, automation, and stagnant minimum wage rates also contribute to income inequality. However, growing income inequality disproportionately impacts women and people of color as these populations are concentrated in low-wage jobs. This trend is a result of historical practices, such as racial segregation and policies that banned women and people of color from accessing education and higher paid professions, as well as ongoing factors, including biased hiring practices and inadequate childcare support.
Grow an equitable economy: Policies to create good jobs for all
- Raise the floor on low-wage work by increasing the minimum wage or enacting living-wage laws, requiring paid sick days, ending wage theft, strengthening workers' rights to organize, and ensuring fair scheduling.
- Ensure entrepreneurs of color can access the capital and know-how to launch and expand their businesses.
- Target economic development and workforce efforts to grow high-opportunity sectors that provide pathways for people without four-year degrees.
- Leverage anchor institutions to support local and minority-owned businesses.
- At the federal level, institute a federal jobs guarantee, dedicate 1 percent of infrastructure investments to a fund for inclusive job and contracting supports, enact a $15/hour minimum wage for all workers, and guarantee workers’ right to organize at scale.
Strategy in Action
California law improves protections for millions of workers in the gig economy. Millions of Californians work as contractors rather than employees, which prevents them from accessing a variety of benefits such as health insurance and protection from employment discrimination. In 2019, however, the state passed a law that makes classifying workers as independent contractors more difficult for employers. The law will lead to the reclassification of close to two-thirds of all workers who are currently classified as contractors, such as childcare workers and janitors. By becoming employees, these workers will gain the right to unionize as well as access to health care, a particularly important change given that independent contractors in California are twice as likely to be uninsured as regular employees according to a recent study. Major employers opposed the bill and soon after the bill's passage Uber and Lyft filed a lawsuit claiming that the new regulations do not apply to them. Despite this pushback, California's strengthened labor legislation is part of a nationwide trend toward greater protection for gig economy workers. Eleven other states have passed similar laws to improve protections for independent contractors along with cities like New York and Philadelphia. Read more.