UMass Donahue Institute

A summary of an article by Robert Gavin that appeared in the Boston Globe

According to a new study by the University of Massachusetts, while those with the highest incomes are benefiting from gains in technology, productivity and globalization, middle class earnings have idled and poor families’ incomes have dropped 15 percent.  Analyzing census data in Massachusetts between 1979 and 2006, it found that only families in the top 20 percent of income experienced substantial gains since the 1980s, the median family income rising 11 percent between 1989 and 2006.   However, the median family income for the middle class stayed flat, and that of the poor decreased.

"Our economy remains very productive, but it shares the gains with only a small slice," said Rebecca Loveland, a coauthor of the study and research manager at the UMass Donahue Institute, a research and economic development unit of the university. "Families with the lowest incomes are still suffering the most and continue to lose."

Because the amount of manufacturing jobs have decreased by about half since the late 1980s, less educated and skilled workers are left with low paying service jobs, says Loveland.  These workers must compete with a vast pool of low-skilled workers, which holds down wages, while those with skills and education are commanding premium pay.  As these premium paid workers spend, prices rise for everyone, putting the pressure on lower-income groups, such as in Boston’s housing market where tight supply and high income has made it one of the costliest.

Some economists say that studies such as UMass’s fail to account for mobility, meaning a low-income family in 1979 could have increased their capacity as wage-earners by 2006 through improved skills and education.  Many people move up the income ladder, says Loveland, but it’s unlikely that income mobility has increased as fast as inequality.

According to the UMass study, in 1979, the difference between the inflation-adjusted median income for a family in the bottom 20 percent and a family in the top 20 percent was $109,000.  By 2006, this gap grew to $156,000, as the scale ranged from $176,000 at the top to $20,000 at the bottom.

Andrew Sum, director of the Center for Labor Market Studies at Northeastern University, says there is increasing danger the gap will widen, especially with the increase in single-parent households which typically earn much less.  In a time when economic status determines the quality of education and when education is key to future earnings, Sum warns of ever-starker inequality to come.

Related Documents:

Income Inequality in Massachusetts, 1980-2006 (PDF 0.4 MB)

August 15, 2008