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Income Inequality in America Focus of Talk by CAP President Neera TandenIncome Inequality in America Focus of Talk by CAP President Neera Tanden

By Lori Atherton
Sept. 23, 2014

Ninety-five percent of all income growth in the United States during the last five years went to the top 1 percent of wage earners, resulting in an income disparity between the richest Americans and the remaining wage earners not seen since the Great Depression, said Neera Tanden, president of the Center for American Progress (CAP).

Tanden—who visited Michigan Law Sept. 18—illustrated her point with these statistics:

  • Before the Great Depression, the top 1 percent of wage earners took home 23.9 percent of all pre-tax income, while the bottom 90 percent took home 50.7 percent of all pre-tax income.

  • By 2012, the top 1 percent of wage earners took home 22.5 percent of all pre-tax income, while the bottom 90 percent took home less than half of all pre-tax income.

While it's easy to focus on income inequality from the perspectives of the richest and poorest Americans, Tanden said in her view, "what's really driving income inequality is not just the top and bottom, but the squeezes on the middle class." In 2001, she noted, the median weekly wage for a middle-class family was $768. In 2012, the median weekly wage for a middle-class family, adjusted for inflation, was still $768, despite a 30 percent increase in worker productivity that resulted in more output of goods.

"Median workers are not seeing the benefits of their work," Tanden said, noting that the typical middle-class family has less disposable income now than in previous years, due to rising costs, particularly those associated with education, health care, and child care, the latter of which has seen the most dramatic increase.

"One of the reasons that child care costs have gone up so significantly," Tanden said, "is that unlike health care or education where there are policies in place to help families bear that cost, there is nothing from a federal point of view to subsidize child care for middle-class families, which struggle to bear these costs privately." She added that the United States lags behind other countries, including China and India, in subsidizing child care costs. "The fact that there are such pressures on the middle class is what's making people more anxious about the future than they ever have been in the past."

Tanden shared the story of a struggling mother of two who, while working a minimum-wage job, was able to take advantage of child-care subsidies offered by her city of residence. Because her children were able to attend quality daycare facilities, the woman had the opportunity to attend college and is now a graduate making $45,000 a year. Those child-care subsidies, Tanden said, made all the difference in bettering that woman's life. Her story "illustrates that as a country, we have choices to make about how to address rising income inequality and the falling behind of the middle class."

It's imperative from an economic, political, and moral standpoint, Tanden said, for policy makers to figure out "how to move up wages, so that everyone has a shot at bettering themselves." For that to happen, though, "politicians on both the left and the right will need to collectively address this challenge until we have a series of answers to the quandary."

Following her remarks, Tanden answered several questions posed to her by Michigan Law Prof. Michael Barr, then took questions from the audience.

Neera Tanden previously served on President Obama's health care reform team to develop and pass the Affordable Care Act. Prior to that, she was the director of domestic policy for the Obama-Biden campaign, managing all domestic policy proposals. She has served as policy director for the Hillary Clinton presidential campaign, as legislative director to Senator Clinton, and as associate director for domestic policy and senior advisor to the First Lady in the Clinton administration.

Her visit was co-sponsored by Michigan Law, U-M's Gerald R. Ford School of Public Policy, U-M's Center on Finance, Law, and Policy, and the Michigan Poverty Law Society, American Constitution Society, South Asian Awareness Network, Students of Color in Public Policy, and Michigan College Democrats.


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