The income gap between the rich and everyone else stopped growing in 2015 due to wage growth across the board, according to an analysis out Thursday.
Income inequality has become an important issue in recent years. Progressive advocates have contested that the income gap between the rich and everyone else has grown well beyond what is acceptable. The Economic Policy Institute (EPI) found that last year was unique in that wage growth for the richest didn’t exceed everyone else.
“Annual inflation-adjusted earnings of the top 1.0 percent of wage earners grew 2.9 percent in 2015, and the top 0.1 percent’s earnings grew 3.4 percent,” the analysis detailed. “What is relatively unique about 2015 was that the 3.4 percent wage growth for the bottom 90 percent matched that of the top 0.1 percent.”
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EPI based its analysis on the latest data from the Social Security Administration. The report adds that because of the growth the bottom 90 percent have wages 3.5 percent above where they were before the recession in 2007. The report contrasts the equal wage growth with how incomes have changed over the last several decades.
“Wages of the top 1.0 percent rose 156.7 percent from 1979 to 2015,” the report said. “The annual earnings of the bottom 90 percent rose just 20.7 percent from 1979 to 2015, and grew by only 4.5 percent since broad-based earnings stagnation began in 2002.”
The top income earners still make exceedingly more than everyone else. A worker in the bottom 90 percent made an average of $34,481 in 2015. In contrast, those in the top one percent made an average of $691,649 annually. Income inequality has sparked multiple political movements including Occupy Wall Street.
Nevertheless, some experts have contested that there are a lot of misconceptions about income inequality. American Enterprise Institute Scholar Edward Conard has argued that income inequality can be good because it offers the potential of a high reward, thus spurring entrepreneurship and innovation.
Democratic lawmakers and progressive activists have proposed raising the minimum wage to $15 an hour to address income inequality. The current federal minimum wage is $7.25 an hour with some states and cities going well above it. The Fight for $15 movement has been at the forefront of the policy push since it formed in 2012.
Some economists contest that the $15 minimum wage is dangerous. They argue that increasing the minimum wage could cost employment opportunities. Employers may be forced to cut back on their workforce or increase prices to overcome the added cost of labor.
The U.S. Chamber of Commerce has noted on multiple occasions that the focus should be on creating more jobs and opportunities so that wages can naturally rise in a competitive labor market.
The analysis does reflect a general trend of positive wage and employment growth. The Bureau of Labor Statistics (BLS) has shown, in its monthly reports, generally positive labor market growth over the past couple of years. Some economists, however, warn the growth has been too sluggish and that many workers are still feeling the impact of the last recession a decade ago.