Work without reward

'State of Working Wisconsin' finds wealthy reap most from productivity gains

Manufacturing Worker
Russ Ward photo via Unsplash

This Labor Day, there is good news and bad news for Wisconsin workers.

The good news is continued low unemployment and steady, modest job  growth, according to the annual State of Working Wisconsin report from the economy and jobs policy think tank COWS, based at the University of Wisconsin.

But chronic problems persist: Stagnant wages, income inequality, a steep decline in union membership, and the continued high cost of health care.

head shot of Joel Rogers
Joel Rogers, courtesy University of Wisconsin

“The richest Wisconsinites increasingly reap the greatest rewards of growth,” COWS director Joel Rogers said in a statement accompanying the report. “Creating more broadly shared prosperity requires stronger public policy focused on equality and equity.”

The good news reflects the current economic cycle, as the state and the nation continue to recover from the economic recession of 2007. Meanwhile “The long-term stories tend not to change in a year,” COWS associate director Laura Dresser told the Wisconsin Examiner.

The bad news also mirrors national trends, but the bad news items in the report have their own distinctive Wisconsin flavor. They are also interconnected. 

Stagnant wages: Median hourly wages in both the US and Wisconsin have stagnated since 1979, despite a more educated workforce working with more productive technology. 

“Nationally, since 1979, productivity has grown by 70 percent, which is six times faster than the growth of compensation,” the report states. “If workers’ wages had kept pace with productivity in the last forty years … the median worker’s wage would be well over $25 per hour today.”

Forty years ago, Wisconsin’s median wage, $17.92 (in current dollars), was more than 4% above the national median. In 2018 Wisconsin’s median, $18.65, had fallen to nearly 2% below the national median.

And while American workers are more productive than ever, “the fruits of their labors have primarily accrued to those at the top and to corporate profits, especially in recent years,” the report states.

Income inequality: Incomes are less unequal in Wisconsin than the nation, but “we are not immune to increasing inequality,” according to the report, and the gap between rich and poor is the largest in 100 years in the state. 

Incomes for the richest 1% of Wisconsin residents are nearly 19 times the average income of the remaining 99%; nationwide, the top 1% have incomes 26 times the average for the other 99%. The differences in those two gaps, the report found, “are driven by the income at the top, which in Wisconsin is simply not as high as the nation’s.”

Tax policy is one factor in income inequality, and “Wisconsin tax policy actually contributes to inequality in the state.” The state’s wealthiest residents pay a smaller share of their income in taxes, the report states. It quotes research from the Institute on Taxation and Economic Policy, which found that the state’s top 1% of earners paid 7.7% of their incomes on taxes; those in the top 2-5% pay 8.5% of their incomes; and the remaining 95% pay 10% or slightly more of their incomes. 

A Wisconsin Budget Project analysis that found that legislation passed in 2017 and signed by then-Gov. Scott Walker cut the taxes on average for Wisconsin residents in the top 1% bracket by $10,015, while giving the bottom 20% bracket an average $175 tax cut, the COWS report said.

Unions: Once a bastion of organized labor and one of the most heavily unionized states in the nation, Wisconsin has seen its union strength plummet.

In 2000, 18.7% of Wisconsin workers were represented by unions, compared with 14.9% nationally. By 2018, unions represented just 8.6% of Wisconsin workers. Nationally the rate was 11.7%:  union membership in Wisconsin fell more than twice as much as it did nationwide.

Act 10, the 2011 law Walker introduced and signed stripping most collective bargaining rights for public employees, was “one important driver of this change,” the report says. 

In the private sector, the 2015 so-called “right to work” law has further contributed to union decline, Dresser pointed out. The law forbids unions from requiring workers covered by their contracts to pay dues, while the union is still required to represent those workers in employer negotiations.  

Health care costs: The report concluded that Wisconsin’s failure to accept expanded Medicaid coverage from the federal government under the Affordable Care Act has imposed broader costs on the state and on workers. 

Those include $1.1 billion in federal money lost to the state budget; a hike of 7% or more on individual health insurance premiums on the private insurance market; and, based on a study from the National Bureau of Economic Research, the deaths of 144 near-elderly people that could have been avoided had the expansion funds been accepted.

Laura Dresser head shot
Laura Dresser, courtesy University of Wisconsin

Gov. Tony Evers and Democratic lawmakers have introduced a bill to accept the Medicaid expansion funds after Republicans stripped a similar provision from the 2019-20 state budget.

While trends similar to those in the report are found nationwide, Wisconsin shows how state policy choices can shape them, Dresser said. That might be most obvious in the Medicaid decision, but it’s not limited to that.

“People may ask, what can a state do about income inequality,” she said. “But you see the state moving policy that widens the gap instead of moving away from the gap. It’s a policy choice at the state level that turned Wisconsin from a relatively high-overall union state to a low-union state. It’s a policy choice to keep restructuring taxes to deliver the greatest gains to the top 1%.”

Erik Gunn
Erik Gunn reports and writes on work, the economy, health care & policy, and related subjects for the Wisconsin Examiner. He spent 24 years as a freelance writer for Milwaukee Magazine, Isthmus, The Progressive, and other publications, winning awards for investigative reporting, feature writing, beat coverage, business writing, and commentary. An East Coast native, he previously covered labor for The Milwaukee Journal after reporting for newspapers in upstate New York and northern Illinois. He's a graduate of Beloit College (English Comp.) and the Columbia School of Journalism.

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