Divergent Fortunes: Top Incomes and the Middle Class in Pennsylvania
Author: Price, Mark
Date: 2014-00-00
Type: Numerical/Quantitative Data
Subjects: Income,Trend Analysis,Middle Class,Population Distribution,Salary Wage Differentials,Economic Climate,Counties,Regional Characteristics,Low Income,Social Change,Social Mobility,Economic Impact,Economic Change

The pace of income growth since the 1970s has been slower for Pennsylvanians than in the 30 years following 1945. In addition to being slower, income growth since the 1970s has also been lopsided, with a small fraction of the highest-income households capturing most income growth in Pennsylvania. This report examines the extent to which these statewide trends since the 1970s manifest themselves in changes in the degree of income inequality within each county or county grouping. Specifically this report examines two yards sticks for the degree of inequality by county or county grouping: (1) How the size of the middle class in each county or county grouping changed between 1979 and 2010-2012; and (2) How the share of total income captured by the top 1% of taxpayers changed in each county between 1978 and 2011. The communities that make up Central Pennsylvania, the region in Pennsylvania with the largest middle class, are worlds apart from New York City where Wall Street titans claim billion-dollar salaries. Yet this report illustrates that rising inequality isn't just a story of Wall Street incomes rocketing away from the experience of the typical middle-class family in Central Pennsylvania. Compared to 1979, fewer of Central Pennsylvania's households earn enough income today to make it into the region's middle class. Much like trends in every other Pennsylvania county as well as every other state in America, the top 1% of earners in the region saw their incomes climb much faster than the incomes of everyone else. Unchecked over the next generation (defined as another 33-year period--until about 2045) the middle class even in Central Pennsylvania will become a minority and the top 1% of earners will take home 18 cents of every dollar of income in the region. In short, Central Pennsylvania is headed where Philadelphia and Allegheny County have already arrived. Where are the Commonwealth's largest cities headed by about 2045 if we extrapolate trends since 1978? A middle class that encompasses between 42% and 38% of the these counties' households and a share of total income of the top 1% of taxpayers approaching 29%, a level of inequality greater than that which characterized class-divided Europe in 1910. The primary drivers of the rise inequality are changes in policy and business practices. Employers have become more aggressive in opposing union organizing. The enforcement of labor law has weakened and lead to rise of employers engaged in wage theft. For much of the last generation, macroeconomic policymakers at the Federal Reserve did not prioritize maintaining low unemployment thus depressing wage growth for most workers. Low wage workers have lost ground as the purchasing power of the minimum wage has lost value against the rise in prices. The deregulation of the U.S. financial sector, poor corporate governance and changes in tax policy have allowed privileged economic agents (CEOs and top managers) to claim an increasing share of the income the economy is generating. A first and modest step in forestalling a more unequal future for Pennsylvania's communities that Pennsylvania policymakers can influence directly is the state's minimum wage. Increasing the minimum wage to at least $10.10 per hour, indexing the minimum wage to inflation and applying the new minimum to tipped workers would stabilize the incomes of low wage workers in Pennsylvania. A methodological appendix is included.