National Inequality by the Numbers

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Inequality of both income and wealth is a serious problem in West Virginia and the nation. This post will present some statistics about inequality in the United States that will worry anyone concerned about the future of our society.

Income inequality is different than wealth inequality. Income includes earned income like wages and salaries, as well as passive income from interest on a savings account, dividends from stock, rent, and profits from selling something for more than you paid for it. In essence, income is what a taxpayer reports on her tax return each year. Income inequality is the unequal distribution of income in the population.

Income inequality is measured on a Gini index from 0 to 1. A completely equal society in which everyone had the same income would have a Gini coefficient of 0. A completely unequal society in which one person received all the income would have a Gini coefficient of 1. More equal societies like the Scandinavian countries have Gini coefficients of .3 or below. The most unequal societies have Gini coefficients of .5 and above. Today our Gini coefficient is .47, up from .4 in 1980.

Wealth means net worth, the difference between a person’s assets and liabilities. Assets are the valuable things a person owns such as cash in a bank account, stock investments, a personal residence and retirement accounts. Liabilities are what a person owes, such as a mortgage, a car loan, a credit card balance, and so on. Wealth inequality is the unequal distribution of net worth in the population. While any measure of income inequality is a snapshot of a moment in time, wealth inequality goes beyond variations in year to year income. The United States has more pronounced wealth inequality than any other major developed nation.

Just one statistic will demonstrate this. In his excellent book The Price of Inequality, Nobel Prize-winning economist Joseph Stiglitz observes that “the six heirs to the Wal-Mart empire command wealth of $69.7 billion, which is equivalent to the wealth of the entire bottom 30% of U.S. society.” The following graph compares the 2013 wealth of the top 10% of families with the wealth of families in the middle and bottom of U.S. society.

National Inequality

Source: Inequality.org; Congressional Budget Office, “Trends in Family Wealth, 1989-2013,” August 2016

The history of income inequality in the U.S. takes on a “U” shape when plotted over the period since 1913 when the first income tax was imposed. The top 10% of income earners enjoyed a golden period from the mid-1920s to 1940, capturing about 45% of national income. During WWII and continuing until the early 1970s, the share of the top 10% dropped and remained steady at around 32.5%. This was because of better access to education through the GI Bill and a progressive income tax. But beginning in the late 1970s the share of the top 10% began to climb. In 2012, it had reached 50.6% of income growth.

Stiglitz summarizes our current situation. Recent income growth in America has primarily been in the top 1% of earners – those in the middle and bottom are worse off than they were in 2000. In fact, the income of those in the middle have stagnated. Adjusted for inflation, the medium income for males in 2010 was $49,445, lower than it was in 1997 when this cohort received a median income of $50,123 in 2010 dollars. Our middle class has hollowed out and there is little chance that an American born in a family in the lower income brackets will ever rise to enjoy income in the higher brackets.

Income inequality in West Virginia is somewhat better than nationwide — not because we are an egalitarian state but because we are poor and have fewer people in the super-rich 1% of national income and wealth.  It is still a huge problem.

West Virginia Community & Technical Colleges: Training for Real Jobs

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In 2015, the West Virginia Center on Budget & Policy published its eighth annual report on the state’s economy. The report focused on West Virginia’s labor force participation rate (LFPR), the lowest in the nation — where it has ranked since 1976. Using a regression analysis, the Center isolated several factors that are drivers of the low rate. One of the most important was inadequate education.

West Virginia’s educational attainment rate is also one of the lowest in the nation. Only 21% of the state’s prime working-age population (25-54) has a four-year college degree, compared to the national average of 31%. In this same age category, 42% have only a high school education, the highest rate in the country. But when the LFPR statistics are parsed, it is clear how critical education is. Those West Virginians with a college degree have a higher LFPR than the national average, ranking the state 14th highest.

It does not take a rocket scientist to make the connection. More working West Virginians mean a more prosperous economy, more secure and stable families, and much more. A more educated West Virginia means more of our fellow citizens will be working.

One prime vehicle for accomplishing this is our community and technical colleges. These colleges offer two-year Associate Degree programs and technical certificates. Both of these programs enable students to qualify for stable, high-paying jobs that are available in the area. Community and technical colleges work closely with area employers to learn what skills are needed for available jobs and then design the specific training programs that provide them.

There are nine colleges and twenty-seven campuses in the West Virginia system. Two of the colleges – Blue Ridge CTC and Eastern West Virginia CTC – are in the Eastern Panhandle. With over six thousand enrolled students, Blue Ridge CTC is the third largest institution of higher education in the state after WVU and Marshall.

The system is led by Chancellor Sarah Tucker and administered by a Council for Community and Technical College Education consisting of educators and business leaders. Businessman Butch Pennington of Martinsburg serves on the Council.

The two Eastern Panhandle CTCs are leading the way. For example, Proctor & Gamble’s huge new factory in Berkeley County will ultimately hire as many as 700 employees. Blue Ridge CTC has a program now to train prospective P&G employees in Robotics, Machine Operation and other technical skills. Eastern CTC in Moorefield offers Associate degrees and Certificates in Wind Energy Turbine Technology to serve the operators of 199 wind turbines in the surrounding six-county area.

In fact, Community & Technical Colleges are an essential part of any effort to recruit new manufacturing and high tech business to the state. These businesses all assess the availability of well-trained, capable employees before making a commitment to locate here. By 2020, it is estimated that 65 percent of all American jobs will require some form of post-secondary degree or credential. Economic development officials depend on community and technical colleges to prepare more students to fill these jobs.

Our Community & Technical College system is by no means perfect. The system was recently criticized by legislative auditors for not holding individual institutions accountable for failing to meet annual goals. But according to the Council, over the last six years the college degree attainment rate has increased by 3%. Each one percentage point increase represents 10,000 West Virginians who have graduated from college and chosen to remain in the state of West Virginia upon graduation.

The Community & Technical College system is now facing severe budget cuts. But these colleges appear to be just what West Virginia needs to develop students into productive employees in good-paying jobs outside our “boom and bust” energy industry.

Repeal of Obamacare: A Disaster for West Virginia

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In January 2016, Congress passed a budget reconciliation bill repealing much of the Affordable Care Act by simply removing the funding for it. President Obama vetoed the bill. Now congressional Republicans threaten to do the same in the upcoming new session.

Most likely, Congress will not have a replacement for the ACA ready to go for quite some time. Republican leaders propose to make some provisions of the repeal effective immediately and defer the effectiveness of other provisions until a replacement bill can be passed.

A repeal through a reconciliation bill can only affect those provisions that have an impact on the federal budget. Among those is the expansion of Medicaid adopted by 31 states, including West Virginia. A recent study by the Urban Institute details the disastrous effects on the nation’s healthcare system of a repeal by reconciliation, even if the effectiveness of major parts of the repeal is delayed two years.

The bottom line is that repeal by reconciliation will hit states like West Virginia the hardest because these states would lose the most federal funding. Even if the elimination of funding for Medicaid expansion were to be delayed until 2019, the number of uninsured in West Virginia would rise from 88,000 now to 272,000 in 2019 – an increase of 208%.

Who will become uninsured? The Urban Institute study predicts that nationwide 82% of the newly uninsured would be members of working families and 56% would be non-Hispanic whites. A majority of the newly uninsured – 53% –would have earnings between 100% and 400% of the federal poverty level. Another 25% would be people with incomes below the poverty level.

One effect of the loss of health insurance is that people who need to see a doctor simply won’t. These people are at risk that their health status and earning capability will decline. And uninsured health emergencies are often the cause of a breakdown in family financial stability. Others will get emergency treatment at hospitals and clinics, but will have no insurance to pay for it. This is called uncompensated care.

How does uncompensated care get paid for? The people receiving care may pay out of their pockets. More likely, state and local governments or the hospitals and clinics themselves could be forced to absorb the cost. On December 6, 2016, the two main hospital trade groups sent a letter to President-elect Trump and congressional leaders stating that repealing Obamacare could cost hospitals $165 billion by the middle of the next decade and trigger “an unprecedented public health crisis.”

A recent  op-ed piece in the Charleston Gazette by Renate Pore, Chairwoman of the West Virginia Medicaid Coalition, said correctly that “[h]undreds of thousands of lives — pregnant women, children, working parents, seniors, people in nursing homes and who need long-term care – every family in West Virginia has a real stake in this debate.”

West Virginia voted for President-elect Trump, and our congressional representation is heavily Republican. Now is the time for them to help West Virginia avoid the financial disaster that would occur through a repeal of Obamacare that does not simultaneously replace it with acceptable policies and federal spending to insure the poor and middle class.

Broadband in West Virginia

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On December 4, 2016 the Legislature’s Joint Committee on Technology met to receive the report of the new Broadband Enhancement Council. Unfortunately, few legislators showed up but among those who did were Del. Paul Espinosa (R – Jefferson, 66) and Del. Sarah Blair (R – Berkeley, 59). Many Democrats were defeated in the election and new Delegates have not yet been assigned to committees.

It is widely accepted that fast broadband speeds are essential in the competition among states for new business. Other benefits include broadband-enabled virtual visits with medical professionals, lower cost online education and online job searches. We need adequate broadband throughout West Virginia but, as in many other ways, we lag far behind the rest of the country. Thirty percent of West Virginians do not have access to internet upload and download speeds that meet the FCC’s definition of broadband, and 50% of rural West Virginians do not. We rank 48th in the nation when it comes to broadband access.

The Council’s report was presented by Chair Robert Hinton, who is also the Executive Director of the Upshur County Development Authority. Hinton’s presentation was energetic and knowledgeable. He made clear that the Broadband Enhancement Council favors a 100 Mbps standard in West Virginia instead of the slower 25 Mbps standard that now is considered by the FCC to be broadband. The discussion raised the possibility of public/private partnerships to build out the “middle mile” infrastructure that will supply broadband to the unserved.

The middle mile can be likened to the interstate highway system connecting large distances, while the last mile can be likened to off-ramps and local streets. The last mile is the actual connections to broadband end users from the middle mile. Because of West Virginia’s terrain, the middle mile might be more complicated and expensive to construct here than in other states.

According to Hinton, a public/private partnership might involve state funding for construction of the middle mile in exchange for commitments from the providers, such as Frontier Communication, to build out the last mile and provide service at certain speeds or perhaps at a certain price.

Del. Espinosa, who is a former Frontier executive, asked several questions. Without referring specifically to the public/private partnership idea, Espinosa asked Hinton about proposed legislation from last session that would have required broadband providers to meet certain minimum broadband speeds. Espinosa said that he would be concerned about any requirements placed on providers that might end up “causing some people to lose service altogether.”

Espinosa later clarified his remarks, saying that that in his view there is already adequate middle mile infrastructure in West Virginia. The issue according to him is the last mile connections. He said there are customers in rural areas who are satisfied with as little as 3 Mbps and don’t want to pay for more. A state-mandated higher speed, with its likely greater cost to consumers, might actually cause some consumers to drop internet service. But it doesn’t seem like much to ask that providers figure out how to provide fast broadband service to all users, even those who would choose a less costly option, at a satisfactory return on investment. After all, this is the business they are in and providers in other states have solved the problem.

The Legislature will have to be sensitive to the industry’s ROI issues, but before long it should require internet providers to be creative and flexible about how to serve West Virginians.