Portland observer., August 01, 2012, Page 7, Image 7

^orttani» (Dbscruer
August I, 2012
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Page 7
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Suffocation of Oregon's Middle Class
The surge of
income
inequality
by J ason G ettei .
prior year. So w hile the w ealthiest 1
percent piled on top o f their already
tow ering incom es w hat m any w ould
co n sid er a full year's w orth o f earn ­
ings, the typical w orker's m easly
gains w ould barely buy h a lf a bag o f
groceries.
T hus, the decades-long trend o f
increasing incom e inequality co n ­
tinues. In 1980, the average incom e
o f O regon's richest 1 percent w as
about 10 tim es the m edian incom e.
By 2007, the eve o f the G reat R eces­
sion, the average incom e o f O regon's
top 1 percent was m ore than 32 tim es
that o f the typical O regonian.
In the econom ic crisis that began
in late 2007, all incom e groups took
a hit. But w ith the official end o f the
recession in 2009 and the start o f a
period o f sluggish grow th, the in­
com e o f the w ealthy took o ff again,
w hile that o f the typical O regonian
barely budged.
O ver the last generation - reces­
sions, recoveries and expansions
included—the rich have gotten richer
w hile the O regonian in the m iddle
has gotten poorer.
T h e tr a je c to r y to w a rd in ­
c re a s e d in c o m e in e q u a lity is the
ro a d th a t le a d s to th e e n d o f the
A m e ric an D ream . I f th e re 's s o m e ­
th in g th a t p ra c tic a lly all A m e ri­
A n O regon C enter for Public
Policy analysis o f recent incom e
data show s the continuing suffoca­
tion o f O regon's m iddle class. T hat,
in turn, spells bad new s for our
state's long-term econom ic w ell­
being.
T he data, courtesy o f the O regon
D epartm ent o f R evenue, is for 2010,
the First full y ear o f the econom ic
"recovery" follow ing the end o f the
G reat R ecession. O C P P 's analysis
show s the resum ption o f grow ing
incom e inequality and continued
stagnation o f the typical O regon
worker.
W ell-o ff O regonians certainly
benefited from the return o f eco ­
nom ic grow th (albeit slow grow th)
in 2010. A fter adjusting for inflation,
the average incom e o f O regon's
w ealthiest 1 percent ju m p e d from
about $645,000 to about $689,000 -
a gain o f $44,000 in a single year.
T he typical O regonian, how ever,
had little cause for celebration. T his
w orker earned about $30,839 in 2010,
a gain o f ju s t $15 com pared to the c an s c an a g re e o n , it is th a t a n y ­
o n e w h o w o rk s h ard an d p lay s by
the ru les sh o u ld be ab le to m ak e it.
A n in c re a sin g b o d y o f re sea rc h ,
h o w e v e r, sh o w s th a t so cia l m o ­
b ility — th e a b ility o f a ch ild g ro w ­
ing up in p o v e rty to m o v e in to the
m id d le c la ss o r h ig h e r as an a d u lt,
fo r e x am p le — is lo w er in co u n tries
w ith g re a te r in c o m e in e q u a lity .
In c o m e in e q u a lity has a d e b ili­
ta tin g e ffe c t o n th e e co n o m y . A
re c e n t stu d y by th e C e n te r fo r
A m e ric a n P ro g re ss p o site d fo u r
w ay s in w h ich risin g in co m e in ­
e q u a lity an d a sh rin k in g m id d le
class u n d erm in e eco n o m ic g row th
in th e U .S.:
F irst, a stro n g m id d le c la ss p ro ­
m o tes th e d e v e lo p m e n t o f h u m an
c a p ita l and a w e ll-e d u c a te d p o p u ­
la tio n . T h e se are e sse n tia l fo r a
te c h n o lo g ic a lly
advanced
e c o n o m y su ch as o u rs.
S e c o n d , a stro n g m id d le c la ss
c re a te s a stab le so u rc e o f d e m an d
fo r g o o d s a n d serv ice s. T h e re are
o n ly so m an y c a rs, h o u se s and
s e rv ic e s th e ric h b u y w ith all th e ir
m o n ey .
T h ird , a stro n g m id d le c la ss
in c u b a te s th e n ex t g e n e ra tio n o f
e n tre p re n e u rs . In o th e r w o rd s, an
e c o n o m ic a ris to c ra c y d o e s no t
p ro d u c e th e n e x t g e n e ra tio n o f
in n o v a to rs .
Fourth, a strong m iddle class
supports inclusive political and eco ­
nom ic institutions, w hich underpin
econom ic growth. Or, as form er U.S.
S u p r e m e C o u rt J u s tic e L o u is
B randeis once put it, "Y ou can have
w ealth concentrated in the hands o f
a few , or you can have dem ocracy.
But you cannot have both."
Few public policy issues are m ore
im portant than reversing the surge
o f incom e inequality. A lthough n a­
tional policies have a huge im pact
on the direction o f incom e in eq u al­
ity, state policies also have an in flu ­
ence.
A t the very least, O regon law ­
m akers should not m ake the p ro b ­
lem w orse by giving additional tax
breaks to the rich.
T o th e c o n tra ry , la w m a k e rs
should raise revenue progressively
— that is, on the basis o f ability to
pay. T hose resources w ill m ake our
tax system fairer and enable O regon
to invest in education, health care,
infrastructure and the m any other
public structures that create eco ­
nom ic opportunity for all.
E veryone - the m iddle class, the
poor and the rich - will ultim ately be
b etter o ff for it.
Jason Gettei is a policy analyst
with the Oregon Center fo r Public
Policy.
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