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New directions in closing income gap

By Noah Berger  |  February 16, 2006

INCOME INEQUALITY has grown across America -- and faster in Massachusetts than in most of the country. Since the early 1980s, the income gap between the wealthiest and poorest 20 percent of families has grown more in Massachusetts than in 47 states. Incomes at the top grew nearly five times as fast as those at the bottom and almost twice as fast as those in the middle.

These findings were reported recently by the Massachusetts Budget and Policy Center, a research organization I direct. The report also proposed solutions to close the gap: a higher minimum wage, an improved earned income tax credit, and other progressive tax policies.

There have been occasional efforts to close the gap. But for two decades, economic growth has primarily benefited our wealthiest residents -- and many hard-working families are falling further behind. This trend could have troubling long-term social and economic implications for the state.

Is a new direction possible? Yes. A response to our report from a leading voice for the Massachusetts business community suggests that attacking the problem of income inequality could bring together voices from across the political spectrum.

Brian Gilmore, an executive vice president of Associated Industries of Massachusetts, told The Patriot Ledger: ''The employment opportunities here that pay good wages now, for the most part, require at least two years of post-secondary education. The way to narrow the gap between low-wage earners and others is increased education."

Gilmore recommended that the state devote resources to adult-education courses, including English as a Second Language and more workforce training.

The Associated Industries of Massachusetts is right that education-oriented solutions could play a vitally important role in raising wages. Unfortunately, Massachusetts has cut funding for public higher education by more than 20 percent in real terms since 2001.

The reason the state has not done more in recent years to attack inequality is not a lack of good ideas. It is that meeting this challenge has not been at the top of our public agenda.

When elected leaders talk about economic policy they usually talk about growing the economy. But there is another, equally important economic issue: helping all people to share in economic prosperity. That issue should be at the center of every discussion about the economy. State government can and should stimulate economic growth by giving people the tools to be successful and by strengthening the basic public infrastructure and institutions a modern economy needs.

State government also needs to meet the challenge of helping low- and middle-income people to participate in and benefit from our economic progress.

The ideas suggested by AIM and the Massachusetts Budget and Policy Center report could help to increase significantly the incomes of families who struggle to make ends meet. Real solutions have been proposed from across the political spectrum. Why not start a discussion, hear everyone's best ideas, and act quickly and aggressively?

The Legislature has already taken some steps, by considering proposals to raise the minimum wage and by including increased funding for workforce training in the economic stimulus bill.

The state may find that working to close the income gap will also be the best way to grow the economy. When people have the education and training they need to get good jobs, the state becomes a more attractive place for employers to locate. When the wages of low-income workers are raised, more money circulates in their communities and local economic conditions can improve.

From the end of World War II to the 1970s, incomes grew in America as the standard of living of working people rose. Let's resolve to be able to say the same thing about the coming 20 years, at least in Massachusetts.

Noah Berger is director of the Massachusetts Budget and Policy Center.