Reducing Immigration Would Close Income Inequality Gap

By Joe Guzzardi
June 24, 2015

Americans hear a lot about income inequality. During the months leading up to the 2016 presidential election, the candidates will vow to end it or at the very least close the gap between the richest and the poorest Americans.
Of course, their promises are political bombast. Ending income inequality is a far greater challenge than most realize, even though informed voters recognize that earnings disparity is widening and fast becoming an insurmountable problem.
The Economic Policy Institute’s latest research found that the chief executive officers of America’s top firms earn at least three times more than they did 20 years ago, and ten times more than 30 years ago. In all, top CEO’s make more than 300 times what the average worker earns. In 2014, the average CEO salary was $16.4 million.

EPI’s report is chocked full of nuggets like this one which underline how difficult the task of eliminating income inequality is: “From 1978 to 2014, inflation-adjusted CEO compensation increased 997 percent, a rise almost double stock market growth and substantially greater than the painfully slow 10.9 percent growth in a typical worker’s annual compensation over the same period.”

CEO pay increases over the past few years reflect improving corporate market conditions, and a rise in profitability and stock prices. While individual CEOs may or may not be responsible for the gains, they all benefit from the broad-based successes.
Although financial page headlines suggest that the economy is improving, that’s a more accurate statement for executives at the top of the income distribution chart, but less so for the typical worker. Those in upper management have enjoyed the fruits of their corporate labor, compensation up by 54 percent, while the average workers’ incomes at those CEO-headed companies has fallen 1.7 percent since 2007.

Theoretically, the income inequality gap could be closed in two ways. The top tier could earn less or the bottom tier could earn more. But since the CEOs are unlikely to take pay cuts and equally unlikely to approve substantial increases for hourly or lower-management workers, the vicious cycle will continue.

The fastest and most efficient way to reduce the income inequality is to limit the number of poor people immigration adds to the population every year. Census Bureau data from 2010 and 2011 show that immigration increases during last few decades has caused a dramatic spike in the United States’ low-income population. Although many immigrants eventually make economic progress the longer they live in the country, those who have been in the United States for 20 years are still much more likely to be poor, lack health insurance, and depend on the welfare system than are native-born Americans.

Immigrants and their U.S.-born children account for one-quarter, 11.9 million, of the poor in the U.S. and are more likely than native-born Americans to fall into that category, 23 percent versus 13.5 percent.

At a minimum, slowing immigration would give Americans and recent immigrants struggling for financial stability a better chance at success. But an immigration solution is unlikely to be considered, let alone implemented. Too many benefit from high immigration including those wealthy CEOs whose companies take advantage of the cheap labor it provides.