 forward to every two years, but actually a variety of products that live on in digital form that you can look at constantly. Now, with all of those new things, let me just remind you that we still do produce a book and that book will be available later on in the fall in late November and it will be available in addition to traditional hard cover and paperback formats. It will also be available as an e-book and if you are interested, as I really hope you are, in ordering the book, you can do so by visiting stateofworkingamerica.org where you'll find information about how to provide information so that you're notified when those sales can be made. Now, today's briefing is really about the content of the book and what you can expect to see in the digital format or the printed format, whatever you prefer. You're going to hear from three of the authors of the state of working America, Josh Bivens, our research and policy director and the author of the Income Chapter could not be with us this afternoon, but the remaining co-authors will provide an overview of the key themes that emerged as they went about producing this book and they will also provide some data points to answer really what is the implicit question of this whole project. How is the economy working for people who work for a living? So, we're going to hear from the authors and then after their presentation, we will have time for questions and discussion with you and the audience about the content of the book and certainly about how this might be useful in whatever work you're engaged in. Let me just have a brief note about the packets that you received when you came in. Those burgundy packets contain, I hope, a little feature from the Washington Post which talked about wages and some of the key trends that emerge in the book. Unfortunately, they use the word report throughout. It's a book. So, you know, just take note, substitute book for report. You'll also find some information about the authors, the esteemed authors. Those of you who know EPI well know, of course, how wonderful these people are, but just very briefly, Larry Michele, our institute's president who's happened to be a co-author of all 12 editions of the State of Working America. He never lets us forget it, but Larry will provide an overview and talk about some of his work in putting together the book. He coincidentally is the principal author of the Wages chapter. Then we'll also hear from Elise Gould who wrote the poverty and the mobility chapters of the book and Heidi Shearholts who wrote the jobs and the wealth chapters of the book. But you'll also find what's, you know, we're all really proud about over here. This little thing here, right, technical term, little do-hickey, but this thing that looks like a business card is anything but. It's actually a flash drive, a USB drive which contains all of the digital stuff that I was telling you about. So you can get the full copy of the book. You can also get every copy, a copy of each of the fact sheets that we have compiled that associate the book as well as a click to launch link which takes you directly to stateofworkingamerica.org. So show all your friends, only people who came to this briefing are getting this today. So you all are among the elite few. So with that, let me turn it over to Larry and we'll get into the book and then we'll be having questions and answers in about a half an hour. Thank you. Thank you very much, Christian. I want to pause for a moment and thank many of the people in the room who helped us make this book. I mean it feels like a coming-out party. And this is a book that definitely takes an institute. And we have Mike, I want everyone to stand up. Mike and Eric and Nick and Hillary and Natalie, Dan and Laura, editors, communications people, web people, research assistants. We could not do this without these folks. So thank you very much. Now sit down. Now sit down. And Jody Franklin is still here, communications director all the way in the back. Thank you very much. Yeah, this is the 12th version. We've been doing it every even year since 1988. The institute was only founded in 1986. So this has been a major part of what we've done. And we do it because we believe that an economy that works can only be an economy that is working to lift the living standards of the vast majority. And therefore we do what we can to call attention to what is actually happening to low and middle income families and low and middle income workers. And that's what the state of working America is all about. I'm proud to say that we've had the state of working America has been copied by other countries. There's a state of working Great Britain, a state of working Russia, a state of working Brazil. And over the last 14 years, our partners and the state level through the Economic Analysis and Research Network do what we call state of working X reports. There's a state of working New York and Maryland and Wisconsin and North Carolina and Utah and everywhere else. And so every year, our earned staff works with people giving them data so that they can also do specifically what's going on in their state and relate it to the very same trends. So this time, the 12th edition, I'm gonna offer up what are the four main takeaways and then the three of the four co-authors are here. We're gonna walk you through how we got to these. And the first one is that we're just now through what we call a lost decade. In the last decade, income growth really has been absent for people in the middle and low income. That's true of income. That's true of wealth. That's true of the hourly wages of most workers. It is not just the great recession, but includes the impact of the great recession. But the last recovery was weak. And over the last 10 years, the hourly wages, as we'll discuss, have not improved for most every type of worker. So we have had already a lost decade. Second point, we fear, we expect that there is a lost decade in front of us with the current high unemployment expected to persist for many years before we actually have the share of the workforce that is employed, returning to what it was in 2007, let alone 2000. We don't expect the typical family's income to return to the 2000 level or even the 2007 level for many years to come. So we face absent, vigorous new policies. We face an additional lost decade. Now, the third point, even the three decades before the 2000, the two decades before the 2000s, was a period, I guess I'm supposed to do this, was a period of rising inequality. And what that meant was that low and middle income families did not share in the overall growth of the economy, and that their incomes grew, but grew, that we think at a quite inadequate level, given the fact that there was a lot of income produced in this country. So we are saying in this book that it was rising inequality that prevented over the last 30 years, low and middle income families from sharing in overall economic growth that didn't benefit adequately from getting the fruits of economic growth. And the fourth point is just the paraphrase, Hedrick Smith in his new book, this didn't just happen to the middle class broadly. It was done to them. It was policy decisions, either failures to act or actions which failed the broad majority, which led to the inequality that prevented low and middle income families from enjoying the fruits of economic growth. And this is important because too many people feel that the economy is something outside. They have no effect on it. It is sort of operates independently. In fact, it does not. Just the book that was written in 2010 by Josh Bivens called Failure by Design, this didn't just happen. It was an economic system driven by economic policy decisions that designed what happened. And so it is not a surprise. And that we feel should be empowering because what was done means that people organized for their own benefit can have it be a different way. And with that, I'm going to turn it over to my colleague Elise Gould. Thanks, Larry. And welcome everyone. So I'm going to take you through sort of the dry part of the presentation. So I expect that if you can make it through mine, you'll be okay for the rest. It'll be a little more exciting. So I'm going to first talk about the lost decade and then the lost decade to come, sort of the sad story of the future. And then I'm going to talk a little bit about the 30 year trends that Larry alluded to of rising income and wage inequality. So I'm going to start and I have to now do this. I see. It's funny. There we go. You can see it on the board. And each of these figures that you're seeing up here, you can see this is figure 2b. This is taken directly out of the book. So as you might guess, this is in chapter two in the income chapter. And so each of these are going to be labeled. You can find all this information on our website and on your cool handy flash drives and in the book as well. That'll be coming out in November. Okay. So what this shows you is how America's broad middle class has already suffered a lost decade. And why is that? What we're looking at here is the real median income of working age families. We focus on working age families because we're looking at families whose major source of income is through the labor market. So we're not talking about elderly Americans who are getting government transfers, social security, the value of Medicare. We're not looking at that component. We're talking about working age families. And there's three distinct periods that I want to show you on this picture. The first is the late 90s from 1995 to 2000. Then 2000, 2007. That represents the last full business cycle. We tend to focus on business cycle peaks to make sure that over time we're always comparing apples and apples, right? So a lot of the data you're going to see today are 1979 to 2007. You'll say, well, why aren't you showing us the most recent period? Well, the last labor market, the last main business cycle peak was in 2007. So we're going to show you both of those. So here I'm showing you the last full business cycle 2007 and then what happened in the Great Recession in the aftermath from 2007 to 2010. So in the first period, the late 90s, we can see that the real median income of working age families can actually increase. And it did increase in that period. Then what we see over this 2000, 2007 business cycle is flat and, in fact, falling incomes, just slightly falling, a full business cycle when incomes did not increase for those at the middle. That's what we call the beginning of the last decade. None of the gains of the economy went to the middle. And then we see the Great Recession. And what we do, you can't really see it in here. So the Great Recession happens and we see this big market decline. But it's not all about the Great Recession. It's also about the 2000, 2007 period. So it was a last decade not only because family incomes declined in the recession, but also in the full business cycle that preceded it. So the next picture about the last decade here, I'm looking at the cumulative change in total economic productivity and real hourly compensation. This is from 1995 to 2011. There's two things I want to define for you in this picture. The first one is real hourly compensation. We're focusing here not just on wages, but total compensation. So that includes health insurance benefits, the value of those health insurance benefits. That includes retirement benefits, what's left of them. And so that that is what we're measuring. It's not just wages. So if people want to tell a story about wages being eaten up by health insurance benefits, you're including all of that in here in total compensation. Okay, so that's one. The second thing is productivity. And so what's productivity? Productivity is measured as output per hour worked. It's the potential that could have been put into wages and benefits. We consider that a key economic benchmark and we talk about productivity a lot at EPI and in this book, and Larry's going to mention another chart of productivity a little bit later. And we believe that the wages and incomes of low and middle income families should at least match the overall rate of productivity growth as it did in the 30 years following World War Two. And what we're seeing here is a disconnect between workers becoming more productive and what's happening to their real compensation. So if you look at the light blue line, the median worker, they did have some gains in the late 90s, but still lagging productivity. Then once the 2000s hit, you can see that the median worker is has flat growth, right? There's no growth at all. And in fact, it's falling in the Great Recession. And if you look then at college graduates and high school graduates, it's not college graduates are not tracking productivity really any better than any other group. They're they're lagging productivity and their wages are flat. They've seen flat growth throughout this 2000s period. So that is another way we're identifying this lost decade. So then what about the lost decade to come? Why are we so pessimistic? It's not because we want to be. It's unfortunate that the facts are showing this pessimism. If we look at key economic indicators, the unemployment rate and the projected unemployment rate, these are numbers from the congressional budget office. And every year they put out projections into the future of what the unemployment rate is going to be. And they have changed their projections. What you can see here on the dotted line, they made projections in 2009 and 2010, 2011, 2012, each consecutive year, more pessimistic projections, more pessimistic projections of what the unemployment rate is going to look like into the future. And if you look at the latest one, the 2012 line, you can see that they're projecting that we're going to unemployment rate is going to remain above 8% well into 2014 is not going to ever get down to the levels that we saw in 2000 into the projected future. So what does that mean? What does the unemployment rate mean? If we want to then look at what that means for real family incomes, what this figure shows for your 2J shows the change in real family income of the middle fifth, actual and predicted. And the prediction is made as taking the relationship between the unemployment rate and family incomes at the middle and the middle and we're going to talk about the middle a lot here. The middle is that is our families within the 40th between the 40th and the 60th percentile. So that middle fifth, that middle quintile, however, that resonates with you, that is the middle fifth. Those are middle income Americans by the strict definition of what that means. So we're looking at here is the actual income change and then the predicted into the future and we're using two different predictions of the unemployment rate, the CBO predictions that I showed you before and the slightly more optimistic predictions by Moody's. And in either case, even the more optimistic predictions, we're not seeing incomes recover for that middle fifth of American families. Right? They're not hitting that 2000 level, let alone that 2000 that not either the 2007 or the 2000 level right into the future. These are up to 2018. So we are at the start of another lost decade and it's projected to stay unfortunately pretty bad for some time. All of this is on top of 30 years of growing wage and income inequality for most Americans. So let me show you some of the trends of what's been happening. This first chart shows the cumulative change in real annual household income. We're looking from 1979 to 2007. Again, the focus on business cycle peaks here. This is from the congressional budget office data as well. We think about real annual household income. It's real. It's inflation adjusted. What is annual household income? Annual household income includes pretty much everything that the household gets. So it's all the earners, what their labor income is. It also includes what their government transfers are the value of Medicare, the value of their health insurance benefits. So security, everything that they get that goes into their household. That's what we think of when we think of household income. That's how it's measured. If we look at that, that middle fifth, that middle fifth that I was talking about before. So if you look at that 40th to 60th percentile between 1979 and 2007, that group grew only 19.2 percent. Whereas you see at the top, it grew about 240 percent. When I say the top, I'm talking about the top 1 percent. So the middle fifth only grew 19.2 compared to over 240 percent at that top 1 percent. It's also a point to think about where that 19.2 percent came from. The majority of that increase in household income for that group actually came in the form of government transfers. In social security, in the value of Medicare, that's where most of that 19.2 percent came from. It didn't come from labor income. And to the extent that their labor incomes were going up for households, it's because they were working more. It's because of an increase in hours, not because of an increase in hourly wages. So the 19.2 percent is mostly due to government transfers to the extent that it's actually about labor income. It's not because they're getting more on an hourly basis. It's because they're working more hours. That's how they're getting those returns. And I highly recommend reading chapter 2, the income chapter talks a lot about those dynamics and where that you can break down that 19.2 percent. Either way, it's far lower than that 240 percent you're seeing at the top 1 percent. So this is household income. I'm going to switch to wages. And when we talk about wages, we're talking about individual workers. No longer households, but individual workers. And here again, we're breaking it up by wage group. Here, we're looking from 1979 to 2010. And we're looking at wages using Social Security Administration data. Incredibly useful data that we've mined for this purpose. And what we can see here is the bottom 90 percent, the bottom line here. So everyone except for the top 10 percent. The bottom 90 percent of workers grew 15.2 percent over this entire period from 1979 to 2010. At the same time, the top 1 percent grew over 130 percent over this period. So there's a growing concentration of labor incomes. So I talked about household incomes, which includes all the members in the household, looking at different forms of income. And here I'm looking at wage income in particular. So the top 1 percent grew much more than 130 percent. So you might ask, well, what makes up that difference? It's capital incomes. We look at capital incomes. This is the cumulative change in real annual household capital income by income group. Again, going back to the CBO data from 1979 to 2007. And what's capital income? Capital income is the return to assets. Owning physical capital, owning financial capital, so it's the interest payments, dividends, realized capital gains, other business income. Essentially we think of capital income or the returns to holding wealth, whereas labor income is the returns to work. So here are the returns to holding wealth. What we see here is that the middle and below really never had very much. We know that they never really had very much, but what they had actually almost all but disappeared. You see that all of them wind up actually below the zero percent line between 1979 and 2007. At the same time, we see the top 100 percent growing over 300 percent. Incredible concentration of capital income at the top. And what exacerbates that even further is the fact that capital income has grown as a share of total income. And so that story is exacerbated and the growing concentration of both labor income and capital income has contributed to the household income conservation at the top with the 1 percent, the top 1 percent. So I'm going to turn it over to Heidi and she's going to she's going to give you some of the key slides. Thank you, Elyse. All right, yeah, I get to do a little bit more of the fun stuff now. This Elyse presented the trends and I'm going to talk about what that means on the ground. What are the consequences of this increasing inequality? The first thing, wait, I have to be the third person to figure this out. All right, there we go. The consequences of rising inequality. This pie chart shows the total share, the pie chart represents 100 percent of household income growth between 79 and 2007 and let me take two seconds to explain why perhaps those oddly sounding years were the ones we picked. Those are two business cycle peaks. 1979 is sort of when you can mark the dramatic increase in inequality and then 2007 is the latest business cycle peak. We just look peak to peak because we don't, we want to look at this long-term trend towards increasing inequality so we'll sort of avoid business cycle dynamics. That's why we use these two years. All right, so this shows the total amount of income growth over those 28 years that accrued to various parts of the income distribution. I'm going to point out two key points here. First of all, upper left, the top 1% got an amazingly disproportionate share. The top 1% got 38% of all income growth over these 28 years and the other key point is just how little most of the distribution got. So I will, if you start, okay, if you start looking at the very, at the the small slice that goes like this, that the bottom 20%, the bottom 5th, they got less than 1% of the total growth and income over this period and if you sort of scoop down to the right adding up those pi things through the 90th percentile, you will see that the entire bottom 90% got just 36.9% of the total growth and income over this period. That's less than what the top 1% got. But this slide is, I think, a key slide of the whole, okay, when we started this, when we started putting together this PowerPoint, it had 70 plus charts in it. We're down to many fewer than that. You can thank us for being kind. But this is, in my view, one of the most important charts that we show. So what it answers the question of why does the 90% care if the top 1% is doing so great and it underscores one of the key points in the book, which is because the top captured so much of the growth, there was less for everyone else. And this goes through a little exercise to say, okay, what if we just had had equal growth over this period, how would middle income people have done? So the bottom edge of this, the bottom edge of this shaded area, that shows actual middle fifth income over this period. In 2007, middle fifth income was $70,000. This is comprehensive income, including the cash value of health insurance, everything. So in 2007, $70,000. The top part of the top edge of that shaded area is a result of a little exercise. And it's just what would the middle fifth have gotten if they had simply seen the same growth rate as the overall average? Another way to say that is how would the middle have done if inequality hadn't increased over this period? Not if it had decreased. We're just saying if it just held, if inequality just held steady at its 1979 levels, it wasn't like an equal utopia in 79. We still had inequality. If we just hadn't seen inequality increase over this period, how would the middle fifth had done, how would they have done? They would in 2007 have had $89,000 instead of $70,000. At $19,000 inequality tax. That says 27% difference between what they have and what they could have had if we'd seen equal growth over this period. This is why the rest of the distribution cares that we've seen such dramatic increase in inequality. All right, so this, I'm going to switch temporarily from a discussion of income, which is the total amount a household brings in in a year, to a discussion of wealth, which is a total amount of assets a household has minus the total amount of debts a household has. So it's a snapshot of your net worth. So we have a whole section on wealth. I'm just going to give you one slide. This just shows, it sort of underscores, that this increasing inequality in income that we've seen translates into increasing inequality of wealth. So this chart is analogous to the original pie chart I showed, it shows how much of the total increase in wealth between 1983 and 2010 went to various points of the wealth distribution. Key things to notice here, the two tall bars on the right-hand side, that's the top five combined, that's the top five percent. They got about 75% of the total wealth over these 28, 27 years. And then the other very striking feature of the last, of wealth in the last three decades is the negative bars, the first three negative bars. Those represent the first three fifths, the bottom 60% of the wealth distribution, not only did they see no gains, they actually saw a decline in wealth over these three decades. All right and this next chart looks now at the bottom of the income distribution at poverty. We have a whole chapter on poverty. This is one of the key charts that comes out of that chapter. It really gets at how do the trends we've seen affect the bottom of the distribution by doing a little exercise. So this exercise, I'll explain it this way, the dark blue line, the top one that flattens out, that's the actual poverty rate. The lighter blue line that goes down, that line is the simulated poverty rate based on the relationship between changes in GDP per capita and the poverty rate up through the early 70s. And here's how, here's the take-home message here is up through the early 70s. As GDP per capita grew, the poverty rate went down, which is exactly what you would expect. A country gets richer, fewer of its citizens live in poverty. So that's the kind of thing that intuitively you would expect to see happen, but what we see here is this break in that relationship. Around the early 70s we saw the poverty rate flatten off. The GDP per capita kept growing, the country kept getting richer and richer and richer, but the riches weren't, as we've seen in all the other stuff, they were being captured by the top. They weren't reaching down the income distribution, so we got no more improvements in the poverty rate. What this suggests is that if we had continued to see broadly shared growth, that we would have continued to see substantial improvements in the poverty rate. And I have one more slide, which I think is a super important slide to kind of push back against a narrative that's out there, which is isn't this kind of how economies develop? Isn't this kind of to be expected that we see this rising inequality? The answer to that is a resounding note. We've had periods in our own country's history where we saw both strong growth that was broadly shared. So you can see it here. This breaks up the last 60 years into two components. Up through 1979 are the light blue bars. You can see we got strong growth and it was solid at the bottom fifth, the second fifth, the middle fifth, up through the whole distribution. During this period the bottom 95% actually grew a little bit faster than the top 5%. So there was inequality was decreasing slightly over this period. And then there's a break, there's a shift. We see that the 1979 to 2007 period, which is what we've seen in lots of different slides already, which is this increasing inequality. And I'm going to turn it over to Larry to talk about how the fingerprints of policy are all over this shift. But before, wait, give me one second, before I let him come up to talk about that, I just want to say that the things that he's going to discuss, there actually is no disagreement that they increase inequality. People from both sides of the discussion agree that things like declining value of the minimum wage, declining unionization, increasing globalization with with less prosperous countries, increasing executive pay, declining top tax rates, everyone actually agrees that those things increase inequality. The claims of people who favor those things is that they'll unleash growth that will have such a massive increase in productivity efficiency will be so much stronger that even though they increase inequality, the faster growth will make everyone better off. And this chart shows that's not what actually happened. That we see in the second period that we got the increasing inequality as expected, but what we didn't get was this accompanying burst of growth that was supposed to go with these policy changes. It was only the top five percent that got growth that was anything like what they had seen in the earlier period. And now I will turn it over to Larry. Thank you Heidi. Okay, so the fingerprints of policy. We're, I'm going to take you through some explanations of growing inequality of wages and the factors that were driving that, which I think are also the same factors that allowed for there to be an expansion of capital income relative to labor income. So I think of, you know, what we're doing is talking about what are some of the identifiable factors that are policy related. Either policy decisions that were made or policy decisions that should have been made that weren't made. Failures of action or actions which were failed to have been done. Now to go to what we consider to be the heart of the matter of inequality which is the gap between productivity and wages and compensation that at least discussed earlier. This is a longer view which shows that the output of goods and services prior work productivity grew along with the compensation of a typical worker up through the late 1970s. But since then has dramatically diverged. Okay, so basically there's a very important point. The economy could have afforded to make everyone a lot better off, the vast majority, a lot better off than they actually got, right? It's not that we were broke. It's also we are not going to be broke. We can talk about that too. We were not, we have not been broke. It's just that the gains didn't get to the vast majority. The actual numbers, if you just compare productivity and median hourly compensation, productivity from 1973 to 2011 went up 80 percent. The hourly wages and benefits of a typical worker, middle class worker grew 10 percent. Okay, 80 percent on the one hand, 10 percent on the other hand. Not very much at all. And that is at the heart of the matter. Now the way to understand this, we think rather than talk about wage inequality as one undifferentiated phenomenon, is to break it down into three key wage gaps. Because each of these gaps grew for different reasons and at different times. And so it's easier to understand if you break it down. So what are the three key wage gaps? Well one is the top 1 percent. You know, we've already reported to you that the top 1 percent of wages grew 131 percent from 1979 to 2007. 131 percent while the bottom 90 grew a total of 15, 16 percent. So one gap is why did the top 1 percent zoom away from everybody else? Okay, then that leaves two other gaps. It's the gap between the people at the middle versus the bottom of the wage structure and the gap between people in the middle and the top. Okay, for economist types it's the 95, 50 wage gap, 95th percentile relative to the median, and at the bottom the median versus the 10th percentile, let's say. Okay, so each one of these things can be readily explained all in the book. So first let's just go to the top wages, which one of the policy factors that really drove this was the fact that this is the effective federal tax rate, the average tax rate that the various income groups paid. The point of this is that the top used to pay a lot more in taxes than they did starting in the late 1970s, reduced further. And the point is that the incentive to have really high wages and income is much greater when your tax rates are far lower. I mean if you're paying 80 percent taxes, you know, negotiating for an extra million dollars, that may not be, you know, something you really really feel as strongly about as when you keep 70 percent of what you earn. And the two things that really drove the top 1 percent of incomes and wages were the pay of executives and the pay in the financial sector. Those are the two things. So this chart shows the growth of the incomes of the top 1 percent, which used to be 9.7 percent of total income and grew to 21 percent. But you can see that what expanded were the two blue areas. The dark blue area is the pay of executives and the light blue area is the pay in the financial sector including executives. And what you can see is that 60 percent of the growth of the incomes to the expansion of the top 1 percent was due solely to those two factors. Now that's not surprising because you're all familiar with this graph from EPI on the compensation of CEOs of large firms relative to the workers in their industries. And what you can see is that in 1973 CEOs earned 20 times what a worker in their industry earned. By 2011 it was more than 200 times. 200 times a worker pay 20 times. The differential grew 10 times. That also is a failure of corporate governance policy. Okay so let's go to the other end. We explained the top what happened at the bottom. The bottom basically is a matter of primarily in the 1980s the wages of low-wage women fell a lot. And since the end of the 1980s the bottom in the middle have grown pretty much the same for both men and women. Right so any factor you want to talk about it's not about people that are disadvantaged relative to the middle. It's been pretty uniform since the end of the 1980s. What happened in the 1980s? Well the first thing is we allowed the minimum wage to fall to unconscionably low levels. This is a graph that shows the value of the minimum wage as a percent of the average wage of a production not supervisory worker which is a represents 80 percent of the workforce so think of it as the average worker. So in the 1960s the minimum wage represented about 50 percent of what an average worker earned. By now it's down to 37 percent and it fell a lot in the 1980s. That alone explains about roughly 60 percent of the wage gap overall around two-thirds of the wage gap that occurred among women between a middle wage woman and a low wage woman is just the erosion of the minimum wage. The other thing that really matters here is unemployment. This chart shows what is the relationship between lowering the unemployment rate by one percentage point for instance from eight to seven and what the effect it has on the wages of men and women by their desal with the 10th being low wages and the 90th being high wages the dark blue being men and the light blue being women and what you see from this is that lower unemployment means the most for low wage women more than middle wage women and for middle wage women relative to high wage women right so higher unemployment exacerbates wage inequality and it does so for men in fact unemployment has a pretty much a larger effect on male wages than it does on on female wages and so those two factors alone the high unemployment in the 1980s and erosion of the minimum wage to us explains what happened to the gap between the middle and the bottom which grew in that decade but hasn't grown since. That leaves us to basically the rest of the phenomena of the growth of wage inequality where middle wage workers did not keep up with those of high wage workers and I'm going to talk about just two of the main factors one is globalization which economists are increasingly willing to acknowledge I mean it's always been true and API has been documenting this for many years but I think economists are now more openly acknowledging that globalization especially with regard to trade with low wage countries puts pressure on the wages of not only manufacturing workers but all middle wage workers and this shows the manufacturing imports as a share of the U.S. economy GDP the dark lines is total imports the light blue lines from the less developed countries and you can see that it's been growing the whole time but it really took off in the 1990s and has continued to grow in the 2000s. If you want to explain inequality and if you use as your metric we have one study that we've updated it's a study by Paul Krugman from 1995 that we've updated through 2011 which show that the education wage gap between college educated workers and non college educated workers about a third of the growth of that wage gap between 1979 and 2011 is totally due to this globalization trend and so this contributes heavily. Union coverage is another trend the reason why an erosion of collective bargaining affects wage inequality and suppresses the growth of middle wage middle wages is because there are far fewer workers who get an advantage a wage and benefit advantage from collective bargaining it's also because you shrink a sector of the economy which has less inequity collective bargaining tends to set rates that have a narrower spread between high wage and low wage and also workers of the same type of occupation tend to get the same pay rather than a wide difference so there's more wage equality less inequality in the in a sector governed by collective bargaining but also collective bargaining in the past was able to set the standards of for wages so that people who were not under collective bargaining frequently got higher wages and benefits from their employers when they worked in an occupation or industry which had high union density and this is all part of I think a broader narrative which is the reason why the middle didn't keep up didn't benefit from overall productivity growth is the erosion of bargaining power both in terms of their unemployment both in terms of the lack of collective bargaining and the erosion of labor standards more generally everything from weakness of prevailing wage laws the enforcement of fair labor standards act the lower minimum wage everything was done there was a lot more pressure on employers on workers and there was an inability of workers to be able to push back so there's where we see the footprints of policy directly on the growth of wage inequality and the gap between high wage workers and middle wage workers has grown continuously from 1979 through 2011 and one can expect that it will continue to grow into the foreseeable future apps in a change in economic policy just to mention a few other topics we cover and then and then we'll have some Q&A first in my recitation of what caused wage inequality there was something that was missing for some people and that is there's no analysis of any kind of skills gap or skills deficit we believe that the problem that middle wage workers faced was a wage deficit not a skills deficit or an education deficit and that you know what explains what happened is an erosion of bargaining power and labor standards not any failure of people to have adequate skills or education two we want to call attention to the escalation of deep poverty not just poverty but poverty where a large share larger share of the population has an income less than half that of the overall poverty rate something that our friend Peter Edelman wrote about in his recent book and that at least documents in the poverty chapter which is also heavily due to policy as we have withdrawn cash assistance for for low income families three people sometimes claim that we have greater inequality but we're such a mobile society we have such opportunity that it doesn't really matter in fact the overwhelming evidence is that the United States is a less mobile country than other advanced countries and it's an open question whether we actually have seen mobility decrease over the last few decades or just stayed the same but it has definitely not increased so there's no reason that in spite of the inequalities we've talked about that there's any more of a chance of anyone in the low income households or middle income to be able to rise to the top uh we have a great chapter on wealth uh one of the uh conclusions there based on the evidence analyzed is that the share of households which own stock or own more than ten thousand dollars worth of stock has actually uh declined in the last ten years that the idea that we have democratized ownership in this society uh is not true and this is in spite of the fact that we've had this uh large expansion of the 401k system over the last 20 years so with all that it's still true that the top 10 percent own 80 percent of all stock wealth and last uh when we uh this is something that uh Heidi was mentioning when we look at the income growth of the middle in the congressional budget office data which has every type of income represented medicare social security employer provided health benefits any transfer anything they get capital gains what grew and what enabled people to uh get income growth that we think was still too modest a lot of it was from social insurance and it was not driven by wage income and we point this out because those who think that the middle class is going to repeat that already poor performance in the next 30 years as we now have policy debates about diminishing our social insurance system we think all of that is very much at stake so with that we'll we'll wrap up and do Q&A I guess we'll invite christian back to be the very handsome mc thank you please give your check at the door we'll take a couple of minutes just to change tape in the recorder so if you could hold your question for just