Getting closer to the presidential election of the US unemployment rate income inequality and shrinking middle class and poverty is becoming frequent words used by – unfortunately – some presidential candidate.
In this paper we focus on poverty and workers. We try to investigate and explore the trend of poverty and income inequality in the US and among US workers.
Everyone agrees that if a country bear a high unemployment or experience negative growth or steady and long term supply shocks, there is no surprise if we observe poverty. But if the country does not experience a high and increasing unemployment but increasing poverty and income-wealth inequality. If this is the case it means people in the country do work but become poorer and poorer. …show more content…
Ignoring to recession of the early eighties and the recent great recession we see a stable steady unemployment during these decades. The average unemployment rate for the whole time period is 5.82 and for the recent 20 years is 5.99. Since the number of data is fewer for the recent twenty years and the high unemployment of the great recession has more weight, even the very small difference can be negligible.
Based the graph we can say during these years the labor market experience a steady states, and if we observe increasing inequality in the US high unemployment is not the reason, or on the other hand the increasing income gap is not because some portion of the labor force has not been used in economic cycle. I talk about the inequality situation later in this paper.
Some people may say not only we have to consider unemployment rate, but also we should consider the quality of employment (in terms of part time jobs and full time jobs, or duration of unemployment). I understand it, but it is beyond the scope of this paper, and I prefer to keep it simple and only consider the unemployment rate as a sign of stability in the labor market in the long …show more content…
The real household income is declining or at least we can say it’s not in the stable situation and it is not increasing.
So far we can say that on approximately 95% percent of the labor force has been working but the inequality has been increasing one of the possible reasons is people real income is not increasing (for most of the period is decreasing).
The question is why, in the real term, their income is not productive. In classical economics we know real wage equals to productivity. Let’s take a look at the productivity of American workers. The data is annual total labor productivity in the US between 1988 2014. The original data was quarterly and I make annual, manually. Also it was in the decimal scale and the numbers here are multiplied by 100 by me:

As we can see the labor productivity is steadily increasing. Eventually we observe same amount of people has been working. They have been more productive each year, on the other hand this increasing productivity is not presented in their income. Or they don’t earn what they really deserve. These incompatibility between real wages and productivity could be considered as one of the source of income inequality from the labor market