Growing Wealth Gap Hurts Wage Earners

Cash. (CC0 Creative Commons).

Our economy, our communities, our schools, and our families fare better when every person in the state has full access to opportunity.

But the gains from Wisconsin’s growth are not being widely shared. A growing concentration of income is being held in the hands of the top 1 percent, while the incomes of everyone else stagnate, making it harder to make ends meet and achieve economic security. There is an even greater gap between the almost exclusively white 1 percent in Wisconsin and communities of color where incomes are appallingly lower than their white counterparts.

The incomes of the very richest have skyrocketed in recent decades. Since 1973, the incomes of the top 1 percent nearly tripled even after taking inflation into account: the average income of the top 1 percent of Wisconsin residents is now $964,000. Meanwhile, the average incomes of everyone else increased a paltry 18 percent over that same period.

Share of Income Going to 1% in Wisconsin Climbs

What’s happening is the rich are taking a continually-growing share of all income, leaving a smaller piece of the pie for everyone else. The share of all state income going into the pockets of the top 1 percent has more than doubled since the 1970s, to the point where they now take 16 percent of all income in Wisconsin, or $1 out of every $6 earned.

This trend is exacerbated by lawmakers who pass policies that are touted as a way boost the amount of economic activity in the state, but may do little to increase the pay of workers with low wages, and instead will funnel more money to the wealthy and well-connected.

One example is the recent handout to the Kimberly-Clark manufacturing plant in the Fox Valley. After Kimberly-Clark announced plans to close the profitable plant, Governor Scott Walker gave Kimberly-Clark a five-year subsidy worth up to $28 million. That subsidy won’t do much to boost the incomes of workers, from whom Kimberly-Clark demanded salary concessions averaging $8,000 per worker as a condition of keeping the factory open. Instead, the subsidy represents the use of public resources to primarily benefit the wealthy Kimberly-Clark shareholders. This subsidy comes on top of a state tax credit that wipes out the income tax liability of Kimberly-Clark and other manufacturers, another policy that confers huge benefits to a very small number of people and businesses.

The widening income gap, and the policies that contribute to the gap, disproportionately impact, block opportunity, and further restrict economic advancement for people of color in Wisconsin. A legacy of racial discrimination and public disinvestment in communities of color mean that people of color are often barred from joining the group of highest earners, and are left with a continually shrinking piece of the pie.

There’s no magic bullet that will completely undo the growth in inequality in Wisconsin, any more than there was a single cause. Many of the underlying trends causing the changes in our economic landscape are national and are related to broader changes in education, technology, and trade. Nevertheless, there are a number of steps we can take at the state level to keep income inequality from growing, including raising the minimum wage, strengthening tax credits for working families, combatting wage theft, and requiring paid family and sick leave. We also need to create a tax system that provides a level playing field for Wisconsin families and businesses, instead of one that further advantages the wealthy and well-connected who rig the tax code for their own benefit.

Wisconsin families and businesses can’t thrive when all the income growth goes to the very top. For Wisconsin’s economy to be on a solid foundation, everyone needs to benefit from increases in productivity. We must take action at the state level to counteract the growing concentration of income in a few hands and expand opportunity for everyone.