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Reducing Income Inequality to Advance Health

  • Date: Nov 07 2017
  • Policy Number: 20179

Key Words: Ethics, Health Equity, Human Rights

Abstract

Income inequality has steadily increased since the 1970s such that it currently mirrors levels seen leading up to the Great Depression. Factors contributing to income inequality include technological advancements, stagnated growth in educational attainment, globalization, less progressive taxation, and the decline of labor unions. Income inequality harms health by increasing the prevalence of poverty, generating chronic stress due to increased social comparisons, and eroding societal cohesion and destabilizing institutions that protect health. Mitigating the harmful effects of income inequality on health requires concerted action involving the government, academia, employers, nongovernmental organizations, and the media to reduce inequality through taxes and transfers, increasing employment and wages while improving working conditions, expanding access to education from early childhood education through higher education, investing in social programs that protect the vulnerable, and informing the public about ways in which inequality undermines health.

Relationship to Existing APHA Policy Statements

  • APHA Policy Statement 20167: Improving Health by Increasing the Minimum Wage
  • APHA Policy Statement 201512: Ensuring That Trade Agreements Promote Public Health
  • APHA Policy Statement 201315: Strengthening and Updating Social Security to Protect Our Nation’s Health
  • APHA Policy Statement 20136: Support for Paid Sick Leave and Family Leave Policies
  • APHA Policy Statement 20097: Workers’ Compensation Reform
  • APHA Policy Statement 20068: Resolution on the Right for Employee Free Choice to Form Unions
  • APHA Policy Statement 200020: Raising Income to Protect Health
  • APHA Policy Statement 20001: Expanded Family and Medical Leave
  • APHA Policy Statement 9508: Full Employment and Public Health
  • APHA Policy Statement 9204: Labor Unions and Health

Problem Statement

Income inequality in the United States: From the end of the Great Depression through the post–World War II era, the United States experienced an unprecedented decline in income inequality.[1] The primary drivers of decreasing income inequality were highly progressive taxation, wartime wage controls, increased public employment, growth of labor unions, and postwar increases in educational attainment.[1] However, starting in the 1970s, growth in income disproportionately favored capital over labor, worker compensation stagnated despite growing productivity, and taxation became less progressive, ultimately resulting in a return of income inequality to pre-Depression-era levels.[1,2]  

The top 1% of the U.S. population has seen its share of total income increase from 11% to 22% since the 1940s, while the bottom 90% has seen its income share decrease from 68% to 50%.[1] Since 1980, the pretax inflation-adjusted income of the bottom 50% of earners has been stagnant.[1] Currently, the United States is the third most unequal country in the Organisation for Economic Co-operation and Development, with only Mexico and Turkey having higher income inequality.[3] The result of this inequality is worsening social mobility: only 50% of 30-year-olds today earn more than their parents did at the same age, as compared with 90% in 1970.[4] Income inequality further exacerbates the economic disparity experienced by individuals already disadvantaged with respect to race, gender, or disability.[2,3] For instance, while Black men’s wages were 22.2% lower than White men’s wages in 1979, the gap widened to 31.0% in 2015.[5] 

Factors driving income inequality: The growth of income inequality is multifactorial and complex but is generally attributed to technological advancements, stagnated growth in educational attainment, globalization, less progressive taxation, and the decline of labor unions.

Technological advancements have vastly redefined employment and are the largest contributors to income inequality.[6] Technological advancements allow a smaller workforce to generate a larger output through increased worker productivity. For instance, increased productivity in the U.S. steel industry resulted in an 80% reduction in its workforce between 1962 and 2005 while steel output remained constant.[7] In fact, an estimated 87% of manufacturing job losses are due to technological advancements, whereas 13% are due to globalization.[8] While existing advancements in robotics, automatization, and information technology can already automate 45% of activities workers are currently paid to do, advances in machine learning, 3D printing, self-driving vehicles, and other technologies will further decrease the demand for low-skill workers in the near future.[9] As fewer workers are required to generate the same output, the economic benefits of growth are shifted from labor to capital, thus worsening income inequality.[6]

Technological advancements increase the premium on high-skill workers with advanced education.[6] Unfortunately, the U.S. education system has not been able to adapt to the growing need for higher education. Growth in early childhood, secondary, vocational, and postsecondary education in the United States has lagged relative to growth in other developed countries.[10] The country ranked first in college graduation in 1995 but has since declined to 19th among Organisation for Economic Co-operation and Development member countries.[10] Meanwhile, the inflation-adjusted cost of a college education has tripled since the 1970s, largely due to decreasing public investments in colleges and universities.[11] As a result, workers displaced by technology have fewer opportunities to adapt to rapidly changing labor market needs.

Globalization, namely the increase in international trade and ease of capital flow, has served to exacerbate income inequalities stemming from technological advancements.[6] Low-skilled workers now compete with other low-skilled workers internationally, resulting in outsourcing of low-skilled jobs to lower income countries, particularly in manufacturing.[12] Conversely, high-skilled workers are more protected from outsourcing and have seen their incomes rise. For instance, the CEO-to-worker compensation ratio increased from 1:20 in 1965 to 1:303 in 2015.[13] While globalization strengthens the economy and grows high-paying, high-skill jobs, it exacerbates the disadvantages already facing low-skilled workers.

Income inequality has also grown in response to the declining progressivity of taxes and transfers. U.S. federal income tax rates for the highest earners have fallen from a marginal level of 90% during the 1940s to 39%, while capital gains taxes have decreased from 35% in the 1970s to 20%.[14] Furthermore, states and local municipalities rely heavily on regressive sales and excise taxes, resulting in residents from the bottom 20% paying up to seven times as much as the top 20% in taxes as a proportion of income.[15] Finally, individuals and corporations have increasingly avoided taxation by using offshore corporate loopholes, shell companies, and other tax havens.[16] While pretax earnings in the United States are comparable to those in other developed countries, the United States has the highest inequality after taxes and transfers among developed countries.[3,17] The tax system has not adjusted to the rise in income among top earners and has in fact become more regressive owing to policies that protect top earners, thus exacerbating income inequality.[18]

Labor unions contribute to public health by improving wages, benefits, and working conditions through engaging in collective bargaining with employers and lobbying the government for worker protections. They also promote well-being by encouraging democratic participation and a sense of community among workers.[19] Union membership has been in a steady decline since its peak of 33% in the 1940s, falling to only 11% of workers today.[20] The decreasing clout of unions diminishes their ability to collectively bargain with employers and reduces both union and non-union wages.[20] The greatest decline in unionization has occurred among sectors that employ low-skill workers, thus limiting wage increases and leaving workers less protected against the underlying forces driving inequality.[18,20]

The link between income inequality and health: In the 1950s, the United States ranked among the highest countries with respect to health indicators; however, U.S. life expectancy and infant, maternal, and adult mortality have since fallen behind other developed countries, despite significant medical advancements and investments in health care access and quality.[21] One reason behind the lag in health outcome gains is the rise in income inequality. Income inequality has been demonstrated to correlate with worse outcomes in terms of life expectancy, education, infant mortality, homicides, imprisonment, teenage birth, obesity, mental illness, drug and alcohol addiction, and social mobility.[22–25] One study estimated that an excess of 884,000 deaths per year in the United States are attributable to underlying income inequality.[26]

Income inequality harms health directly by increasing the prevalence of poverty and causing chronic stress due to social comparisons.[22] Furthermore, it harms health indirectly by eroding societal trust and destabilizing communities.[22]

As income inequality increases, lower income workers see their income stagnate or even decline, a relationship described as the “concavity effect.”[22] Lower incomes predispose individuals to worse health directly through exposure to harmful environments, decreased opportunities for educational and occupational advancement, and a decreased ability to prevent and cope with disability and disease.[18,22] Income is positively correlated with life expectancy, and gains in life expectancy have been more concentrated among top earners as inequality has worsened.[27] As an example, among individuals born in 1920, men in the top 10% of the earning distribution lived an average of 6 years longer than those in the bottom 10%, while the richest women lived 4.7 years longer than their counterparts.[28] With the rise in income inequality during the 1970s, men and women born in 1950 had a difference in life expectancy between the top and bottom deciles of 14 and 13 years, respectively.[28] In fact, the poorest 5% of the income distribution did not see any gain in life expectancy between 2001 and 2014.[27]

Poverty has a pernicious intergenerational effect, as impoverished mothers are more likely to have unplanned pregnancies, reduced access to prenatal care, higher rates of smoking and obesity, and worse overall health.[29] These disadvantages continue among children, with poverty causing increased exposures to stress, violence, and environmental hazards that negatively affect physical health, socioemotional development, and educational achievement.[30] Unfortunately, with 20% of children in poverty, the United States ranks fifth worst among Organisation for Economic Co-operation and Development countries and is behind Mexico.[31]

In unequal societies, differences in status are more prominent and fixation with one’s socioeconomic status can result in chronic stress from constant social comparisons, learning to expect negative outcomes, and a sense of hopelessness.[23,32] Countries with higher levels of income inequality have higher rates of depression, narcissism, and schizophrenia.[23,32] Inequality creates frustration, stress, and a sense of being left behind, leading to lower levels of trust, happiness, and life satisfaction.[23,33] The social stressors present in an unequal society can drive individuals into detrimental coping mechanisms, and rates of drug and alcohol abuse, gambling, compulsive eating, and violence are higher in unequal societies.[23,24,32,34] This phenomenon is demonstrated in the drastic increase in mortality, particularly among middle-aged non-Hispanic Whites, over the past decade driven by overdoses, liver disease resulting from substance abuse, and suicide.[35]

Unequal societies have decreased levels of trust and social cohesion, which fuel discontent with public institutions, increased political polarization, and sociopolitical instability.[36–38] Starting in the 1970s, Americans’ trust in the media, medicine, corporations, universities, and the government has steadily declined as income inequality has risen.[36] Concomitantly, Congress has become increasingly divided and partisan, resulting in political gridlock and constituent disillusionment.[37,38] Hyper-partisanship and ineffective governance further hinder efforts to mitigate the effects of income inequality on health.[24] Without the political will to develop healthy and economically vibrant communities through investments in education, infrastructure, and social programs, communities have become geographically segregated according to income, with unequal levels of access to the resources and opportunities that promote health and economic mobility.[18,22–24,34] As a result, communities that lack access to high-quality education, medical care, healthy foods, and good-paying jobs are plagued by high levels of violence and incarceration, socioeconomic stagnation, and political disaffection, further hindering their ability to economically advance.[34]  

Evidence-Based Strategies to Address the Problem

Strategies to reduce income inequality and protect health: Effective strategies to reduce income inequality include government action to reduce inequality through increasing progressive taxation and public employment; strengthening programs that protect against inequality, enhance social mobility, and promote health; and effectively communicating the importance of reducing income inequality to improve health to the public.

Government taxes and transfers are crucial in lowering income inequality and are the strongest means of decreasing inequality.[39] Progressive taxes such as personal income, capital gains, and estate taxes place a higher tax burden on those with the greatest ability to pay, thus lowering income inequality.[39] Tax transfers such as the earned-income tax credit target low-income workers and reduce poverty while incentivizing work, again lowering inequality.[2] Regressive taxes such as consumption taxes and tax breaks that benefit mainly high-income groups such as the mortgage interest deduction and the relatively low capital gains tax rate have a null or negative effect on income inequality.[39] Furthermore, tax shelters that facilitate tax evasion for individuals and corporations decrease the progressivity of taxes and lower government revenue, ultimately increasing inequality.[16] Therefore, policies that favor progressive over regressive taxation, limit tax havens, and expand tax benefits to low-income households can reduce income inequality and provide funding for programs that enhance social mobility and health.[2,16,17] 

Public investments and policies that reduce unemployment, enhance wages and working conditions, and allow workers to unionize are effective tools to reduce pretax income inequality. Higher employment among the groups most affected by technological change and globalization can be achieved through public spending on infrastructure development.[39–41] Taking advantage of low interest rates to increase employment and develop infrastructure will result in higher economic growth and reduced income inequality.[40,41] As an example, the American Recovery and Reinvestment Act, signed in 2009 at the height of the recession, provided aid for state education and health care funding, extended unemployment benefits, and funded infrastructure development that generated between 100,000 and 300,000 jobs.[42] Furthermore, increasing the minimum wage reduces poverty and income inequality, increases worker satisfaction and retention, and improves health behaviors and outcomes.[39,43,44] Employers can also strive to provide equitable pay, skill development, and flexible career paths, which can reduce inequality, improve employee retention, and increase labor force participation.[45,46] Finally, improving workers’ ability to collectively bargain for higher wages and better working conditions can result in increases in the influence of labor on politics, reduced income inequality, and safe working environments that advance health.[19,20]  

As public investment in all levels of education from early childhood to graduate education has lagged, improvements in access, quality, and affordability have not kept pace with other developed countries.[11,21] Therefore, enhanced public investment in education to address these shortcomings and increase educational attainment can better prepare individuals with the skills to adapt to the workplace demands of the 21st century.[10,39,40] Specifically, early childhood education is important as it results in significantly favorable returns on investments in terms of educational attainment, income, and health.[21,22] For instance, early childhood interventions have been found to have a return on investment to society of $1.80 to $17.07 for each dollar spent.[47] Graduation rates and economic mobility are enhanced by public spending on postsecondary education, especially by directly subsidizing institutions of higher education and reducing the cost of attendance for low-income students through programs such as the Pell Grant and Stafford subsidized loans.[11,39] Expanded access to trade, vocational, and targeted job training programs can assist workers in adjusting to new professions.[10]

The harmful health effects of income inequality can be mitigated by higher levels of social spending on programs that support individuals during times of vulnerability.[48] Higher spending on safety net programs is associated with improved health outcomes, and this association has been demonstrated in comparisons of the United States with other developed countries and U.S. states with each other.[23,48] The United States lags behind its developed counterparts in sick and disability leave, parental leave, child care, and unemployment policies.[3,39] Notably, only the United States and Papua New Guinea lack national policies mandating paid parental leave, and its absence results in excess maternal deaths, premature births and infant deaths, and higher rates of dropping out from employment.[49] Similarly, the United States is the only developed country without universal health care, which worsens the financial stability and health outcomes of the most disadvantaged.[22,23] Social programs supporting individuals through key points in development, including pregnancy and early childhood, can mitigate the lifelong effects of income inequality.[30] Expanding disability, sick, parental, child-care, health care, and unemployment benefits, as well as protecting safety net programs such as Social Security and government health insurance, can therefore safeguard the health of those most affected by income inequality. 

Americans have become increasingly aware of the rising gap between the rich and the poor and increasingly favor policies that reduce inequality and advance social mobility through educational attainment.[50] However, Americans underestimate the true level of income inequality and are not aware of its effect on health.[23,51] For instance, the average American believes that CEO to worker compensation is 30 to 1 and believes it should be closer to 7 to 1, while in reality the true income gap is 303 to 1.[13,51] Therefore, academic, government, civil, and corporate entities need to increase public awareness of the degree of income inequality and its deleterious effect on health and track progress in reducing income inequality and improving health. The Congressional Budget Office, the Internal Revenue Service, and the Treasury Department regularly track the distribution of household income before and after taxes and transfers and are well positioned to assess the effect of tax policy on income inequality.[2] Measurements of unemployment, labor force participation rates, wage growth, and union participation rates can be followed to assess the strength of employment.[39] Educational attainment can be measured through enrollment and completion rates across all educational levels.[11] Finally, the downstream effects of improving income inequality can be assessed through the key health indicators of infant and child mortality, maternal mortality, life expectancy at birth and at age 50, and adult mortality.[21]

Opposing Arguments/Evidence

Income inequality promotes economic growth and actions to reduce inequality hurt growth: Some academics and organizations argue that income inequality is a beneficial consequence of capitalism and that inequality promotes overall economic growth, ultimately benefiting everyone.[52] Furthermore, redistribution policies and social spending interfere with the free market and thus hinder growth and make society poorer.[53] However, conflicting evidence suggests that income inequality suppresses long-term growth because of its effect in terms of decreasing investments in human capital.[54] Moreover, income inequality and health gains in the United States have concomitantly worsened relative to other developed countries since the 1970s despite continued growth in the U.S. economy.[21] Therefore, economic growth alone does not necessarily result in improved health, particularly if income gains are disproportionately concentrated at the top. 

The data supporting the relationship between income inequality and health are weak: Some researchers have questioned the effect of income inequality on health and argue that models inflate the relationship between inequality and health by not accounting for the heterogeneity of the data.[55] Others argue that while there are data to support the concavity effect of high income inequality causing more poverty and thus worse health, there are less data to support the indirect effects of income inequality.[56] As more research has been published, however, there is increasing evidence of the relationship between income inequality and health. There are now at least 300 peer-reviewed studies of the association between income inequality and health, and a recent review of a subset of studies showed that 94% demonstrated at least one significant association between greater inequality and worse health.[25] Thus, while the impact of the downstream and societal effects of income inequality may not be known precisely, there is growing scientific consensus that income inequality is detrimental to health.

Individual factors explain health disparities rather than income inequality: Individual factors such as demographics and poor behaviors have been suggested as the primary drivers of poor health. There is robust evidence of disparities in income and health by race, sex, geographic location, and other socioeconomic factors.[57,58] However, given trends such as the narrowing of the life expectancy gap between races[35] and the decreased wage gap between men and women,[58] individual factors alone cannot account for all of the stagnation and in some cases reversal of health gains. Income inequality has been shown to have a persistent effect after control for individual factors such as race.[59] Therefore, while the effects of income inequality cannot be completely divorced from the effects of other social determinants of health, income inequality can be considered as an additional social determinant of health.

Similarly, behavioral factors such as smoking, sedentary lifestyles, poor diets, and excess weight are the primary drivers of poor health.[60] However, many of these behaviors are closely linked with income and socioeconomic status.[60] Thus, income inequality can be thought of as an upstream social determinant driving higher levels of poor behavior. As such, behavioral interventions alone are probably insufficient to improve population health.[24]

Action Steps

Actions to Reduce Income Inequality

  1. APHA urges federal, state, and local governments to shift toward progressive taxation, thereby diminishing income inequality and providing funding for programs to mitigate inequality. Specifically, legislation should aim to increase marginal incomes, capital gains, and estate taxes; penalize tax shelters; and expand tax credits to low-income workers.
  2. APHA urges Congress to pass a federal infrastructure spending bill that puts Americans to work repairing our deteriorating infrastructure and building public service, transportation, renewable energy, and health systems to increase employment and lay the foundation for long-term economic growth.  
  3. APHA urges Congress to increase the federal minimum wage and implement automatic increases to match inflation. Similarly, state and local governments should further raise their minimum wages to reflect the standards of living in their jurisdictions.
  4. APHA urges employers to support equitable compensation, flexible career paths, and workforce development to reduce inequality, improve labor force participation rates, and enhance worker satisfaction, retention, and advancement.

Actions to Protect against Income Inequality

  1. APHA urges federal, state, and local governments to invest significantly more in public education from universal early childhood education through graduate education and targeted job training programs to improve educational attainment and better prepare Americans for the work requirements of the 21st century.  
  2. APHA urges federal, state, and local governments to enact legislation supporting sick and disability leave, paid parental leave, child care, and unemployment protections to promote workers staying in the workforce. Programs providing income, nutrition, housing, health insurance, and job training assistance to protect individuals during times of vulnerability should also be expanded.
  3. APHA urges federal, state, and local governments to enact legislation to protect workers’ rights, make it easier to join unions, penalize companies that violate labor laws, and mitigate the harmful effects of technology and globalization on workers. 
  4. APHA urges public, nongovernmental, private, and academic institutions to collaborate to develop dynamic community networks that mitigate the detrimental physical, mental, and societal health effects of income inequality.

Actions to Communicate to the Public

  1. APHA urges academic, public health, and health care organizations to increase public awareness of the deleterious effect of income inequality on health and the importance of advancing health through promoting equality.  
  2. APHA urges the media to routinely report metrics on inequality, employment, education, and health and hold the government, employers, and other stakeholders accountable for progress in these domains.

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