Causes of Income Trends

Causes of Widening Income Gap Deindustrialization Ongoing layoffs Immigrants Foreign Competition Internships

Deindustrialization Defined as: the disappearance or shrinkage of manufacturing industries. Leads to a fall in the number of jobs in manufacturing. It has been widespread in the Midwest and upper south since the 1970’s. **

Layoffs Defined as: involuntary loss of a job. Very rapid increase since the 1970’s. Two years after a layoff, out of every 100 laid off workers, 27 are making more or an equal salary, 73 are making less or not working. **

Layoffs The financial effect is very severe: someone earning $500 to $1000 a week before layoff earns $425 - $850 a week 3 years later. In addition, the wage loss has tended to creep upwards since the 1970’s. **

Layoffs How big is this problem? Counting all workers at least 20 years of age, for the years 1981 to 2003: An average of 4.3 percent of the labor force were laid off every two years. This is not counting disguised layoffs. Estimated total: 30 million.**

Competition from Outside the U.S. Some of the competition is from companies owned and controlled by people of other countries. Examples include Japanese cars and Italian shoes. **

Competition from Outside the U.S. Some of the competition is from companies owned and controlled by U.S. corporations. Examples include GM and FORD parts and supplies from Mexico and China or NIKE products from Indonesia. **

Immigration Viewed as an excess supply problem: The excess supply of unskilled labor pulls down wages of unskilled native born workers. However, the reality is more complex. **

Immigration Many immigrants provide us with products and services we wouldn’t otherwise have Mexican restaurants Oriental grocery stores Many are highly skilled Indian engineers and doctors **

Immigration 3. Many immigrants work in the jobs that native born Americans don’t want to do Picking crops Slaughterhouses Maid service

Immigration So far, in only a few areas has it been clearly shown that the excess supply of cheap immigrant labor has pulled down wages. Southern California, New York, South Florida Otherwise they have not yet had the predicted impact. **

And yet. . . All of these can explain part of the falling incomes and widening income gap. But they raise the question why did those trends accelerate in the 1980’s and 1990’s. **