The Income Gap Is Widening

The term ‘middle class’ is more than an economic distinction. It’s also an appreciation for balance and equity and a national yearning for a strong, cohesive society. Yet a polarizing income gap in Massachusetts and elsewhere is threatening both the class and the concept.
Massachusetts is emerging from the recession ahead of other states, with job creation on the rise. However, the state leads the country (it is tied for first place with Arizona) in having the largest gap between the haves and have-nots, according to the Center for Labor Market Studies at Northeastern University; 10% of households in the state earned as much income in 2009 as the bottom 70% combined during that year.
What is driving this widening gap? Economists differ on this, but many point to executive compensation, declines in manufacturing jobs and wages, a corresponding increase in employment in the so-called ‘knowledge economy,’ and changes in household dynamics, such as the rise in single-parent families. Gaining a better understanding of these issues should be a top priority for the next governor and should be at the forefront of the policy debate in the closing weeks of the gubernatorial election.
New data by the MassINC Polling Group suggest an eroding confidence in a cornerstone of the American Dream: the belief that the hard work of one generation opens the door to a better life for the next. Just 22% of Massachusetts parents believe the next generation will do better than they did financially. This pessimism is a new phenomenon. In 2003, when a slightly different question was posed in a MassINC poll, 68% of parents believed their children would be generally better off.
Why the dramatic change in public opinion? Income inequality has been rising for years, but the difference now is that economic growth isn’t lifting all boats. Over the last decade, census figures show median household income fell by between 1% and 8%. Little wonder that the mood of the electorate reflects strong undercurrents of frustration and resentment.
Growing income inequality and its political implications have received increasing attention across the political spectrum since the 1980s. Alan Greenspan had a point when he said in 2005: “a stark bifurcation of wealth and income trends among large segments of the population can fuel resentment and political polarization. These social developments can lead to political clashes and misguided economic policies that work to the detriment of the economy and society.’’
Perhaps we should have listened. The resentment, polarization, and political clashes contemplated by Greenspan have already materialized. The resulting anger is fueling a push for simplistic solutions to such complex problems as deficit reduction, immigration, and a host of other issues. In essence, the middle ground on policy issues is rapidly disappearing, just like the middle class itself.

Greg Torres is president of MassINC and publisher of CommonWealth magazine. Andrew Sum is director of the Center for Labor Market Studies at Northeastern University.

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