Report Shows State Wage Inequality, Sluggish Growth

Back • Publication Date: September 14, 2021 • Fiscal & Economics

A new report shows significant racial inequality in pay in Connecticut beyond the disparities that exist nationwide. According to the 2021 State of Working Connecticut report issued by Connecticut Voices for Children, the typical Black worker in the state was paid 68 cents for every dollar a typical worker made – 19% less than Black workers were making nationally at 84 cents on the dollar.

“The report shows that Connecticut’s economy has highly inequitable distribution that harms low- and middle-wage workers or working and middle class families, especially those of color and this is due in large part to decline of unions and rise of routine excessive unemployment,” Patrick O’Brien, a research and policy fellow at the New Haven-based advocacy group, said on a Monday call with reporters.

At the same time, Connecticut has lagged behind much of the nation in terms of job growth and economic output, according to the progressive think tank.

“Connecticut’s economy has serious problems,” O’Brien wrote in the first line of the annual analysis.

The 40-page report concluded that Connecticut’s economic output, measured by its gross domestic product, has contracted by 7.6% since 2007 when the national output grew by 17.9%. The state ranked 49th in state-level economic output behind only Wyoming.

Meanwhile, the report found Connecticut has struggled to recover jobs from prior recessions and took deeper job losses during the pandemic-driven recession than the nation as a whole. Whereas the country lost 22.4 million or 14.7% of its jobs during the 2020 recession, Connecticut lost 292,000 or 17.2% of its jobs in the same period.

Based on job growth statistics reported through July, the report estimated it would take the nation around 9.2 months to close its shortfall. Connecticut, meanwhile, was projected to need almost two full years to close its gap.

“If it follows the path of earlier recoveries it will even be much longer,” O’Brien said.

The report also pointed to a gap between the wage growth of low- and middle-income workers in Connecticut compared to the growth in wages for high-income workers. Between 1979 and 2020, wages increased more for high-income workers than for low. Over more than four decades, wages for low-income workers in the 10th percentile increased by about 18% while wages for a median worker increased by about 39%. Meanwhile, wages for high-income workers in the 90th percentile increased by 67%.

“If wages for all workers had grown at the same rate as for workers at the top, a worker at the 10th percentile would have made $16.76 an hour rather than $11.89, and a worker at the 50th percentile would have made $29.52 an hour rather than $24.65,” the report said. “By several measures, wage inequality in Connecticut exceeds that in the U.S.”

The report called on policy makers to adopt more progressive tax policies including a tax cut in the form of a child tax credit and a tax increase in the form of capital gains and dividends taxes. Taken together, the report said that such a policy change could be revenue neutral and boost the state’s economy.

“In simple terms, the report shows that Connecticut’s economic pie has shrunk over the last decade and the wealthy are taking an unfair … share,” O’Brien said. “However, Connecticut could make simple changes to its budget that would provide a fairer share for the state’s working and middle class families, especially families of color, which in turn would increase the overall size of the economic pie.”

During this year’s legislative session, Democrats on the Finance Committee approved a tax package which would have given some families a $600 tax credit per child and included new taxes on families making more than $500,000 a year. The proposals were ultimately rejected after Democratic Gov. Ned Lamont refused to support a budget containing the new taxes. The American Rescue Plan Act has temporarily expanded the federal child tax credit from $2,000 per child to $3,600 for children younger than six years old and $3,000 for kids older than six.

Authors: Hugh McQuaid •  Source: CT News Junkie • View