From luxury to foodstamps: One story of Conn.’s economic ladder

Ken Mathis, in his New Canaan apartment

Ken Mathis, in his New Canaan apartment

Some social service workers say they’re seeing more people coming to them for help who used to be on the rich end of Connecticut’s economic spectrum. That’s the case for Ken Mathis, who used to live in a 5,500 square foot house in New Canaan when he was partner at a number of top business consulting firms and technology companies. Today, he gets by with the help of food stamps and Medicaid. Here’s his story:
Have you seen similar stories of people’s path down Connecticut’s steep economic ladder? Let us know. What does their experience say about the state’s economic disparity? Coming up soon on “State of Disparity,” we’ll share stories of people at the bottom, trying to work their way up that ladder.

Nobel laureate Joseph Stiglitz: Inequality is holding back the recovery (Paul Krugman disagrees)

The New York Times launched a new blog this week called The Great Divide, looking at inequality in the U.S. The blog is moderated by Joseph E. Stiglitz, a Nobel laureate in economics, a Columbia professor and a former chairman of the Council of Economic Advisers and chief economist for the World Bank. Stiglitz wrote the initial post in the blog, entitled “Inequality is holding back the recovery.”

“Politicians typically talk about rising inequality and the sluggish recovery as separate phenomena, when they are in fact intertwined,” Stiglitz writes. “Inequality stifles, restrains and holds back our growth.”

Stiglitz argues there are four major reasons inequality is squelching the recovery:
– The middle class is too weak to support the consumer spending necessary to drive growth
– The middle class is unable to invest in the future through education or starting/growing businesses
– The weak middle class holds back tax receipts needed for infrastructure, education, health, etc.
– Inequality leads to boom-and-bust cycles that make the economy more volatile and vulnerable

Stiglitz blames the economic policies of both the Obama and Bush administrations for making things worse.

“Instead of pouring money into the banks, we could have tried rebuilding the economy from the bottom up. We could have enabled homeowners who were ‘underwater’ — those who owe more money on their homes than the homes are worth — to get a fresh start, by writing down principal, in exchange for giving banks a share of the gains if and when home prices recovered. We could have recognized that when young people are jobless, their skills atrophy. We could have made sure that every young person was either in school, in a training program or on a job. Instead, we let youth unemployment rise to twice the national average. The children of the rich can stay in college or attend graduate school, without accumulating enormous debt, or take unpaid internships to beef up their résumés. Not so for those in the middle and bottom. We are sowing the seeds of ever more inequality in the coming years.”

He offers suggestions for President Obama’s second term.

“What’s needed is a comprehensive response that should include, at least, significant investments in education, a more progressive tax system and a tax on financial speculation.”

A lot to talk about here. Do you agree with Stiglitz’s arguments? Do you think inequality is holding us back from an economic recovery? What about his prescription for fixing it? Would education investment or a more progressive tax system make a difference?

Economist and New York Times columnist Paul Krugman (also a Nobel laureate) disagrees with him. In two responses to Stiglitz (Jan. 20 & Jan. 21), he says he’d love to blame slow growth on inequality. “But I couldn’t and can’t convince myself that the theory and evidence really support that view,” he writes in the second piece. “Inequality is a huge problem – but not for employment growth in 2013 or 2014.”

Incomes across Connecticut: an interactive map

This interactive map from the Connecticut State Data Center at the University of Connecticut shows the median household income for every U.S. Census tract in Connecticut. Click on a census tract and a chart below will show the breakout of incomes within that tract.

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Report: Conn. falling behind other states in disparity ranking

A chart from the report shows how distribution of wealth in Connecticut has changed over the last three decades (click to make the chart bigger)

Another report says the gap between Connecticut’s richest and poorest residents is growing. This one, by the advocacy groups Connecticut Association for Human Services and Connecticut Voices for Children looked at tax and census data over the last three decades. It says incomes at the top of the wealth spectrum have increased dramatically, while the bottom has hardly budged.

You can hear about the report here:

Liz Dupont-Diehl of Connecticut Association for Human Services says Connecticut’s place is slipping nationally in this respect.

“So the gap between the very richest and very poorest quintiles, the top 20 percent and the bottom 20 percent, formerly was ranked 46th, and now is grown to the third worst. And that is since 1977.”

She says the top one percent in Connecticut now earns nearly 30 percent of all of the state’s adjusted gross income.

“The disparity is important because increasingly research is showing that the more unequal a society is, the lower the chance that people have the ability to attain mobility with their situation.”

The advocacy groups say the negative effects of inequality should be mitigated by raising the minimum wage and indexing it to keep up with inflation, making sure the state’s unemployment insurance system is solvent, making the tax code more progressive and strengthening Medicaid and the Earned Income Tax Credit.

Report says wage and unemployment gap is increasing

The advocacy group Connecticut Voices for Children releases their jobs report every year around Labor Day. And the say this year’s report shows Connecticut is increasingly becoming a state of “haves” and “have nots”. The report says the middle income jobs, like manufacturing, that don’t necessarily require a four year degree, are disappearing, and being replaced by lower paying jobs in areas like healthcare, hotels and restaurants.

Listen to the story here:

“Probably the most striking thing we’ve seen is that CT’s middle class is being hollowed out and wealth is increasingly being concentrated among the state’s wealthiest citizens, says CVfC’s Kenny Feder. “Over the recent economic recession and recovery, the highest wage workers enjoyed wage growth 4 times that of median wage workers, while wages stagnated for low wage workers.”

This chart from the report illustrates his point:

A chart from the report showing how much more high income workers made than the median income level in Conn. (solid line)

While more of Connecticut’s jobs are paying less, there’s also more unemployment at the lower end of the economic spectrum. The unemployment disparities are most pronounced in the study when looking at race and ethnicity in the state. In 2011, more than 17% of Blacks and nearly 18 percent of Hispanics were unemployed, compared to just over 7% of Whites. And age makes a difference. The unemployment for younger people, the 16 to 24 year olds who are out looking for jobs, is over 18 percent, more than double the state average.

Connecticut Voices for Children is using their latest report to urge lawmakers to strengthen the state’s education system, as well as invest in job training programs and raise the state’s minimum wage.

Read the full report here.

Just how big a disparity is there?

A recent episode of WSHU’s weekly show “Fairfield County Focus” took a look at economic disparity in that county.  It’s an area with some of the wealthiest towns in the country, as well as many of the challenges of extreme poverty. We began by speaking with Orlando Rodriguez of Connecticut Voices for Children.  You can hear our conversation with him here:

The group’s analysis of poverty and income rates from the 2010 American Community survey is online here.