US News: black/white pay gap rising due to discrimination

[kyphysics]

http://www.usnews.com/news/articles/2016-09-20/black-white-pay-gap-climbing-due-to-discrimination

'We've found that racial wage gaps are growing primarily due to discrimination – and other unmeasured and unobserved characteristics – along with rising inequality in general," William Rodgers, a professor and economist at Rutgers University and coauthor of the report, said in a statement Tuesday. "In order to fully address racial wage gaps, direct action must be taken to decrease discrimination and address the problem of stagnant wages across the board."

 

[Bystander]

"– and other unmeasured and unobserved characteristics – "

 

[Vanadium 50]

Junk science.

I am willing to believe that racial wage gaps are growing, although even this is difficult to measure: median income and median income of the employed are different numbers, as are mean income and median income. However, they provide exactly zero evidence that this is due to discrimination. Their position seems to be "if it's not a variable we controlled for, it must be discrimination". Worse, they could have corrected for that - looked at African-American led corporations (American Express, TIAA-CREF, and in the period they measure, McDonalds) and measured the size of the effect. Worse still, they mix science with policy, even when the science doesn't support the policy: for example, they claim that a great deal of the disparity occurs at the top end of the income spectrum, but argue that this says we need a higher minimum wage.

I am sympathetic to their goals. Junk science is not the way to reach them.

 

[mheslep]

Junk science...
I am sympathetic to their goals. Junk science is not the way to reach them.

Their goals and motivations are unclear. I find when the motivations of the purveyors of junk science become clear they are seldom noble (e.g. Lysenkoism)

 

[mheslep]

Asked and answered some decades ago, starting at 7:40 here:

 

[OCR]

"– and other unmeasured and unobserved characteristics – "

Lol...

 

[kyphysics]

Asked and answered some decades ago, starting at 7:40 here:

mheslep, although Thomas Sowell is a very smart man, he's simply wrong there - at least, when it comes to modern day racial wage gaps..

It should first be noted that he's giving his opinion from decades ago! lol. At best, that was true back then, but I still don't think he's entirely correct there (for those years). I won't speculate if he's a paid shill for conservative think tanks, who believes a different opinion than the one he's espousing in that video, but I do know he's associated with some conservative think tanks.

Possible ulterior motives aside, he's completely forgetting tax changes over the years. From the at least the 1980's to 2016, we've seen tax rates for top earners being cut, while inequality in income has grown for the bottom 90% of Americans. African Americans who were already worse off economically before these tax cuts were hit harder during these times.

Reasons include structural disadvantages (like less programs helping the poor and, but also flat out racial discrimination.

Yes, I'm assuming racial discrimination existed in hiring back then, because I don't know of any studies (not really my area of studies). I just assume it was worse then versus now, given the outward racial progress we've seen over the years in the U.S. (first black President, for example, and lots more progressive people). But in terms of modern day wage and job discrimination, you can look up Roland Fryer's research. IIRC, he's Harvard's first black professor under the age of _____ (something cool like that...cna't remember the exact accolade).

He's done research showing race discrimination in the job market. It does exist.

As to how much it accounts for the increasing racial wage gap in the OP article, I can't say.

 

[russ_watters]

Possible ulterior motives aside, he's completely forgetting tax changes over the years. From the at least the 1980's to 2016, we've seen tax rates for top earners being cut, while inequality in income has grown for the bottom 90% of Americans. African Americans who were already worse off economically before these tax cuts were hit harder during these times.

This is largely a myth due to the fact that the wealthy pay virtually all of the income taxes anyway (top 20% pay 87% of the income taxes) and the poor and lower-middle earners pay nothing or less than nothing (45% of households in 2015). As a result, tax cuts will always necessarily "favor" the wealthy, since you can't cut income taxes for people who don't pay income taxes. Essentially, the growth in income inequality has enabled the rich to pay an increasing share of the income taxes despite decreasing top tax rates (note: due to rising incomes, that doesn't necessarily even mean the rates they pay have decreased, since more income means more paid in the higher tax brackets). The share paid by the top 20% has increased to that 87% from 57% in 1969 and 69% in 2005.

This "inequality" isn't talked about much by the media, but presents a serious political/social danger in my opinion.

http://www.marketwatch.com/story/45-of-americans-pay-no-federal-income-tax-2016-02-24
http://www.nbcnews.com/id/29861648/...ll/t/how-tax-burden-has-changed/#.V-O4DPkrK00

 

[russ_watters]

One takeaway from the article on a part of the issue that appears real:

For example, just completing a bachelor’s degree or more will not reduce the black-white wage gap. Indeed the gaps have expanded most for college graduates. Black male college graduates (both those with just a college degree and those who have gone beyond college) newly entering the workforce started the 1980s with less than a 10 percent disadvantage relative to white college graduates but by 2014 similarly educated new entrants were at a roughly 18 percent deficit.

Their proposal:

Convene a high-level summit to address why black college graduates start their careers with a sizeable earnings disadvantage.

I'm not really sure what a "summit" is or even whether that is supposed to figure out the cause or correct it. My suggestion is doing a statistical study of that specific issue. Potential demographic cause and way to investigate:

More people are getting degrees today than in the 1980s. But are they getting useful degrees? And has the value changed? Examine how the value of degrees in general and different types of degrees in particular has changed over time. This should be able to identify if, for example, the distribution of degrees by race has stayed the same but the inequality between the valuable and low-value degrees has increased. What to do about that would be a harder problem to tackle though, since higher-income degrees such as those in STEM already have outreach programs to try to attract minorities (and women). Perhaps we could add push-away programs to discourage minorities from majoring in low-return fields...such as African American Studies?
[edit] Oh; already been studied:

More African-Americans are going to college than ever before. But according to new research from the Center on Education and the Workforce at Georgetown University, African-American college students are more likely to pursue majors that lead to low-paying jobs, setting up many for future debt and underemployment. And over time these occupational choices contribute to the wealth and opportunity gap between whites and blacks that spans generations.

“Basically, African-Americans have been going to the right church but sitting in the wrong pew,” director Anthony Carnevale said. “In a way they are using education to climb the social and economic ladder, but they’re being steered toward majors that will make them low-earners.”

http://www.pbs.org/newshour/rundown...-represented-among-low-paying-college-majors/
Note, this explains at least part of the gap though not necessarily how it has changed over time.

"Higher education, particularly state schools, are being pushed to demonstrate a kind of economic value," said Jane Rhodes, UIC chair of African-American studies. "In my point of view, that's deeply anti-intellectual and that flies against the face of what a college education is supposed to do. I think universities have failed to demonstrate to students why these disciplines and fields ... that are not obvious career paths are vital, intellectual and experiential pursuits."

http://www.chicagotribune.com/news/...studies-college-major-met-20160905-story.html
Wow. I'm a big fan of irony, but this one makes me sad.

 

[mheslep]

...
He's done research showing race discrimination in the job market. It does exist.

Which Sowell says as well.

Edit: From ~11:00 in the clip

Well, the market puts a price on discrimination. There are people who will pay that price and continue to discriminate.

Above you patronized and smeared the motivations of a scholar. You might reconsider, take another look at what he says.

 

[mheslep]

wealthy pay virtually all of the income taxes anyway

In any case taxes are irrelevant to the OP point, wage discrimination. from employers.

 

[OmCheeto]

This is largely a myth due to the fact that the wealthy pay virtually all of the income taxes...

It's a myth, as long as you define "income taxes" as "federal taxes".

If you were to include all taxes, then, the numbers kind of swing the other way.

I do believe, that even Warren Buffet said something to that effect.

 

[russ_watters]

In any case taxes are irrelevant to the OP point, wage discrimination. from employers.

I'm OK with including that as part of the issue. It affects take-home pay at least.

 

[mheslep]

I'm OK with including that as part of the issue. It affects take-home pay at least.

The OP issue is racial discrimination as it might effect wages. Federal income taxes are not explicitly discriminatory, other than on the *amount* of net income. The distinction is important, as certainly any proposed corrective action in the workplace has nothing to do with taxes.

 

[russ_watters]

The OP issue is racial discrimination as it might effect wages. Federal income taxes are not explicitly discriminatory, other than on the *amount* of net income. The distinction is important, as certainly any proposed corrective action in the workplace has nothing to do with taxes.

I think you need to learn to think more like a liberal: The Oppressors are clever and nefarious, so they utilize demographics to promote their racist agendas. So, decreasing taxes for the rich and increasing them for the poor (if that were true ) is a clever tool of the racial oppression. In this case, The fact that the policies don't mention race is besides the point and only serves to add plausible deniability.

 

[russ_watters]

It's a myth, as long as you define "income taxes" as "federal taxes".

Yes, which kyphysics did when bringing up the issue.

If you were to include all taxes, then, the numbers kind of swing the other way.

It depends on the spin.

I do believe, that even Warren Buffet said something to that effect.

Yes, and what he said about it was wildly misleading. Very disappointing for such a highly respected businessman.

 

[Mark44]

I do believe, that even Warren Buffet said something to that effect.

Yes, and what he said about it was wildly misleading. Very disappointing for such a highly respected businessman.

IIRC, he was comparing his tax rate he pays versus the rate at which his secretary is taxed, not the actual dollar value of the taxes each of them paid.

 

[OmCheeto]

IIRC, he was comparing his tax rate he pays versus the rate at which his secretary is taxed, not the actual dollar value of the taxes each of them paid.

I actually did about 6 hours of research on this the other day.
Of course, it's quite the pain in the behind doing taxes for all 50 states, at different rates, so I didn't take everything into account, so I'm sure my numbers are a bit off.
But here they are anyways:

income                    tax rate*
minimum wage($15,000):    36.0%
median salary($52,000):   41.1%
healthy salary($400,000): 42.3%
Romney 2011($13,700,000): 26.4%
Trump:                    ?

I ran the numbers for Romney this morning, after yesterday's Trump tax burden "revelation".

*Rates are based on federal income, median state income and sales, ssi, and medicare taxes. Filing as an individual with no dependents.

 

[russ_watters]

IIRC, he was comparing his tax rate he pays versus the rate at which his secretary is taxed, not the actual dollar value of the taxes each of them paid.

Yes, and what makes it misleading is that his "secretary" (probably doesn't actually have that title) probably makes on the order of $200,000 a year. But since he doesn't tell us, he makes his point using an unspecified outlier as an example. That's an extremely slimy/misleading argument.

And while we know more about Buffet himself, and it is understandable that he would use himself as an example, he is also an outlier. The point being, that his example is nowhere close to generally true: except for a very tiny/limited chunk of the nebulous "rich", the rich pay much higher income tax rates than the typical "secretary".
http://www.politifact.com/truth-o-m.../does-secretary-pay-higher-taxes-millionaire/

In fact, I'd wager (and can look at the numbers later) that the typical "secretary" who is single pays less than zero in regular income tax and only slightly above zero when you add the payroll tax.

 

[Mark44]

Again, the tax rate itself is pretty much meaningless on its own, and is misleading if the actual amounts of taxes paid are omitted.
Doing very crude calculations (wage * tax rate), I get these figures, based on the numbers you posted:
Wage -- Taxes
$15,000 -- $5400
$52,000 -- $21,372
$400,000 -- $169,200
Romney -- $3,616,800

This is what Russ was talking about with the top 20% paying 87% of the federal income tax burden.

 

[russ_watters]

I actually did about 6 hours of research on this the other day.
Of course, it's quite the pain in the behind doing taxes for all 50 states, at different rates, so I didn't take everything into account, so I'm sure my numbers are a bit off.
But here they are anyways:

income                    tax rate*
minimum wage($15,000):    36.0%
median salary($52,000):   41.1%
healthy salary($400,000): 42.3%
Romney 2011($13,700,000): 26.4%
Trump:                    ?

I ran the numbers for Romney this morning, after yesterday's Trump tax burden "revelation".

*Rates are based on federal income, median state income and sales, ssi, and medicare taxes. Filing as an individual with no dependents.

These numbers, particularly the bottom number is way, way off. Including deductions (though depending on how you slice the numbers), the net of all taxes for a mimimum wage earner is a negative number. If you don't include aid, it might be slightly positive. Did you include both halves of the payroll tax?

 

[OmCheeto]

These numbers, particularly the bottom number is way, way off. Including deductions (though depending on how you slice the numbers), the net of all taxes for a mimimum wage earner is a negative number. If you don't include aid, it might be slightly positive. Did you include both halves of the payroll tax?

I did include both halves. I also see that I botched my federal income tax numbers.
But no matter.
I did is quick survey at a DIY tax calculator and came up with moderately similar numbers.

https://smartasset.com/taxes/income-taxes#Erq126NDcn
              $15,000   $50,000   $400,000      
Oregon          37.0%     32.2%      40.9%
Tennessee       31.6%     27.0%      34.9%
Fed, FICA, State, Sales, Fuel, Property

I ran samples on several DIY tax calculators yesterday, and they all came up with different numbers.

But in no case did I find that a single person making minimum wage would have a negative overall tax burden.

 

[russ_watters]

I did include both halves.

While I can see some merit in the idea of including both halves, it is problematic to do properly since the employer half is not included in a person's gross pay. In other words, you have to give it to them first before you can take it away from them (in your calculations).

Fed, FICA, State, Sales, Fuel, Property
I ran samples on several DIY tax calculators yesterday, and they all came up with different numbers.

But in no case did I find that a single person making minimum wage would have a negative overall tax burden.

I'd be interested to see how those calculators work because some of those components (fuel, property, sales taxes) are very individualized and difficult to compare for different people (unlike the income taxes themselves). So what I see for single digit or negative tax burden is for the much more limited scope of federal income taxes.

For what you are trying to measure, this appears to be exactly it:

http://ctj.org/ctjreports/2015/04/who_pays_taxes_in_america_in_2015.php#.V-r-YvkrK00

The negative numbers come from looking at just the federal income tax (which is what the original discussion point was). But even if you include the payroll tax, it is worth noting (despite popular belief) that the US tax system has gotten more progressive over time, not less:
http://www.taxpolicycenter.org/statistics/historical-average-federal-tax-rates-all-households

Ie, in 1979 the total average federal tax rate of the lowest quintile was 7.9% but in 2007 it was 5.1%.

 

[OmCheeto]

While I can see some merit in the idea of including both halves, it is problematic to do properly since the employer half is not included in a person's gross pay. In other words, you have to give it to them first before you can take it away from them (in your calculations).

I'd be interested to see how those calculators work because some of those components (fuel, property, sales taxes) are very individualized and difficult to compare for different people (unlike the income taxes themselves). So what I see for single digit or negative tax burden is for the much more limited scope of federal income taxes.

For what you are trying to measure, this appears to be exactly it:

http://ctj.org/ctjreports/2015/04/who_pays_taxes_in_america_in_2015.php#.V-r-YvkrK00

Those are very very close to my new revised numbers. (corrected federal rates. does not include employer FICA payments)

income                    tax rate*
minimum wage($15,000):    19.4%
median salary($52,000):   27.9%
healthy salary($400,000): 38.9%
Romney 2011($13,700,000): 26.4%

I'm assuming the "healthy salary" tax rate is so far off due to home mortgage deductions.

But that is an interesting quote from your reference; "Contrary to popular belief, when all taxes are considered, the rich do not pay a disproportionately high share of taxes. Although each income quintile pays combined federal, state and local taxes that are roughly equivalent to their share of the nation’s income, this by no means indicates our tax system is fine as is. In a truly progressive tax system, millionaires and billionaires wouldn’t be paying roughly the same tax rates as working families earning $100,000 per year". [bolding and exaggeration mine]

The negative numbers come from looking at just the federal income tax (which is what the original discussion point was). But even if you include the payroll tax, it is worth noting (despite popular belief) that the US tax system has gotten more progressive over time, not less:
http://www.taxpolicycenter.org/statistics/historical-average-federal-tax-rates-all-households

Ie, in 1979 the total average federal tax rate of the lowest quintile was 7.9% but in 2007 it was 5.1%.

That is referring to just the federal taxes rates. I won't discuss taxes except in aggregate.

 

[Vanadium 50]

In a truly progressive tax system, millionaires and billionaires wouldn’t be paying roughly the same tax rates as working families earning $100,000 per year

Hard to do, since these are essentially the same people. Millionaires are in the 85% percentile of wealth, and $100,000/year is the 75% percentile of income. Most millionaires got that way by saving. The vast majority of them are ordinary folks, and not plutocrats

OK, that doesn't count billionaires, but there are only 536 of them.

 

[russ_watters]

That is referring to just the federal taxes rates. I won't discuss taxes except in aggregate.

Fair enough, you're entitled to it. But I will say I disagree for the reason that Social Security and Medicare are the primary difference between the ways of counting the taxes and these are quite a bit different from the rest of our taxes in terms of what they are for. The irony (and one reason I think it improper) is that while the entitlements make the rates less progressive, they nevertheless directly re-distribute money from the top-down. Further, I think the view that the entitlements are just another tax and just another government program are part of what has us caught in the death spiral we're in. The situation is my primary fear for the future of the country.

 

[OmCheeto]

Fair enough, you're entitled to it. But I will say I disagree for the reason that Social Security and Medicare are the primary difference between the ways of counting the taxes and these are quite a bit different from the rest of our taxes in terms of what they are for. The irony (and one reason I think it improper) is that while the entitlements make the rates less progressive, they nevertheless directly re-distribute money from the top-down.

I can see what you're saying about them making the total rates less progressive.

Excluding FICA
income                    tax rate(Fed income, state income & sales)
minimum wage($15,000):    11.7%
median salary($52,000):   20.2%
healthy salary($400,000): 33.8%
Romney 2011($13,700,000): 26.4%

The rates are quite progressive if you exclude them. (Well, except for Romney. )

But I'm not seeing that big a redistribution, from my further calculations.

     salary     SSI paid in (12.4%)   SSI paid out
    $15,000          $81,840             $118,320
    $50,000         $272,800             $217,464
   $400,000         $646,536             $433,500
$14,000,000         $646,536             $433,500

Only the uber poor are really making out, and not by much.
And if half of the SSI is paid by the employer, then all 4 parties make money on the deal.

Further, I think the view that the entitlements are just another tax and just another government program are part of what has us caught in the death spiral we're in. The situation is my primary fear for the future of the country.

I'm guessing now that it's medicare that has us in the death spiral? Or, as usual, am I missing some factor?

 

[russ_watters]

I'm guessing now that it's medicare that has us in the death spiral? Or, as usual, am I missing some factor?

No, I was referring to Social Security. Medicare's spiral is not the governemt's fault and we get something for our more and more money (longer, healthier lives), so there is still an upside to that pain. With Social Security, on the other hand, we've been Bernie Madoff'd; the money is [almost] all gone. It is a lot of the reason why despite a growing economy and spending cuts our deficit is still high and it keeps getting worse. Assuming nothing is done, the budget pain will keep getting worse and worse until the bankruptcy in 15 years and then the everyone/everything pain begins.

 

[OmCheeto]

No, I was referring to Social Security. Medicare's spiral is not the governemt's fault and we get something for our more and more money (longer, healthier lives), so there is still an upside to that pain. With Social Security, on the other hand, we've been Bernie Madoff'd; the money is [almost] all gone. It is a lot of the reason why despite a growing economy and spending cuts our deficit is still high and it keeps getting worse. Assuming nothing is done, the budget pain will keep getting worse and worse until the bankruptcy in 15 years and then the everyone/everything pain begins.

I actually spent about an hour last night going over the GAO analysis of the situation. It looked very complicated, and as you say, very grim.
Under:

INFOGRAPHIC: The Future of Social Security

If policymakers do not take action, trust fund assets are projected to run out by...
2016: DI trust fund
2035: OASI trust fund​

2016 sounded like something was going to happen pretty soon.

But another infographic addressed how congress temporarily fixed that problem:

What options exist for restoring the disability insurance program's solvency in the short-term?

The Bipartisan Budget Act of 2015 temporarily provided the Disability Insurance (DI) trust fund a greater share of the Social Security payroll tax (2.37 of the 12.4 percentage points, up from 1.8). Along with other changes, this moved the date of DI trust fund depletion from 2016 to 2022.​

And as I said; "It's complicated".

What are the root causes of the gap between costs and revenues?
... the proportion of the insured population ... receiving DI benefits has increased, from 18 per thousand insured in 1970 to 45 per thousand in 2015​

That's a nearly 3 fold increase. hmmmm...

And of course, there are other factors, which I'm sure you are aware of.

 

[russ_watters]

I actually spent about an hour last night going over the GAO analysis of the situation. It looked very complicated, and as you say, very grim.

From the report:

Projected solvency could be restored
immediately with a permanent 16.4 percent benefit reduction for all
current and future beneficiaries, or a permanent, 21.1 percent increase in
payroll tax revenue, or an equivalent combination of benefit reductions
and tax increases.64 Delaying action until 2034—the year the combined
trust funds are estimated to be depleted, i.e., the year of projected
insolvency—would require an initial reduction in benefits of 21 percent or
an initial increase in tax revenue of 29.8 percent,65 or an equivalent
combination of benefit reductions and tax increases; the required benefit
reduction would rise to 27 percent and the required increase in taxes
would reach 40.3 percent by 2089.66 As the figure shows, the earlier
actions are taken to restore projected solvency, the smaller and less
abrupt the adjustment would need to be now as compared to what would
be needed in the future.

 

[OmCheeto]

From the report:

Projected solvency could be restored
immediately with a permanent 16.4 percent benefit reduction for all
current and future beneficiaries, ...

Even as a retiree, who won't be collecting SSI for another 5 years, I'm fine with that.
hmmmm...
I guess I've just been lucky.

 

[russ_watters]

Even as a retiree, who won't be collecting SSI for another 5 years, I'm fine with that.
hmmmm...
I guess I've just been lucky.

Yeah:

Among elderly Social Security beneficiaries, 53% of married couples and 74% of unmarried persons receive 50% or more of their income from Social Security. Among elderly Social Security beneficiaries, 22% of married couples and about 47% of unmarried persons rely on Social Security for 90% or more of their income.

For a lot of people, a 16% (or 21%) benefit reduction would be a huge problem. And it doesn't even fix the underlying problem of a retirement savings/pension program that doesn't provide growth -- it just makes it worse. In the Great Recession, the GDP dropped by 5%. That's about equal to what a 40% payroll tax increase would be...except, you know, permanent.

 

[olivermsun]

So why not, for example, raise or remove the earnings cap?

 

[russ_watters]

So why not, for example, raise or remove the earnings cap?

As Hillary says, social security isn't just a program, it is a promise (to provide retirement income based on how much you pay into it; like a pension or 401k). I don't think it would be right to eliminate that promise for something like a quarter of Americans and don't think that would go over well.

 

[olivermsun]

As Hillary says, social security isn't just a program, it is a promise (to provide retirement income based on how much you pay into it; like a pension or 401k). I don't think it would be right to eliminate that promise for something like a quarter of Americans and don't think that would go over well.

Are you saying that it wouldn't be right for people over the cap to pay more without getting more benefits?