Increasingly Unequal in Pennsylvania: Income Inequality, 1917 to 2011

Authors: 
Mark Price
Publication Date: 
February 19, 2014

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Executive Summary

For more than 30 years, most of the 50 states have experienced a dramatic rise in income inequality. In Pennsylvania, this widening gap between the earnings of most workers and those of the top 1 percent is not the result of the immutable headwinds of globalization but part and parcel of a slow but steady erosion of labor standards, tax policies designed to benefit corporations and the wealthy, and unchecked rising CEO pay.

The economists Thomas Piketty and Emmanual Saez published a groundbreaking study in 2003 documenting rising inequality in the United States over the past century. They found that in the early 20th century, an era dominated by the likes of Pennsylvania banking magnate Andrew Mellon, the share of all income claimed by the top 1 percent of taxpayers rose to over one-fifth of all income in the U.S. Then in a post-World War II era shaped by FDR’s New Deal and the rise of unions like the United Steelworkers in Pittsburgh, Piketty and Saez observed a sharp rise in the incomes of the bottom 99 percent of taxpayers and a likewise decline in the share of income claimed by the top 1 percent.

Starting in the 1980s, a number of factors reversed this trend.  Employers became more openly hostile to union organizing among their employees, while policymakers began lowering tax rates on top earners and corporations.  Minimum wage increases became a thing of the past, even as the economy continued to grow. The result was a rising share of income captured by the top 1 percent and slowing income growth among the bottom 99 percent.

Today the share of income claimed by the top 1 percent in the U.S. is once again about one-fifth of all income in the country, and billionaire activists are funding organizations like the American Legislative Exchange Council (ALEC) to advance state legislation that will solidify their hold over the American economy.

In a new paper following up on the work of Piketty and Saez for the Economic Analysis Research Network (EARN), Estelle Sommeiller and Mark Price developed estimates of top incomes levels and shares from 1917 through 2011 for American states and regions. Here is how Pennsylvania stacks up against the national trends:

  • Between 1979 and 2011, the top 1 percent took home more than half (51.5 percent) of the total increase in Pennsylvania income. Over this period, the average income of the bottom 99 percent of Pennsylvania taxpayers grew by 12.1 percent, while the average income of the top 1 percent grew by 125.5 percent — more than 10 times as much.
  • The lopsided growth in Pennsylvania incomes since 1979 resulted in a rise in the top 1 percent’s share of income from 9.3 percent in 1979 to 17 percent in 2011. This rise in income inequality represents a sharp reversal of the patterns of income growth that prevailed in the half century following the Great Depression’s start; the share of income held by the top 1 percent declined steadily in Pennsylvania from 22 percent in 1928 to 9.3 percent in 1979.
  • In 2011, the most recent year for which data are available, the top 1 percent in Pennsylvania (with an average income of $882,574) made 20 times more than the bottom 99 percent ($43,399).

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