Economic inequality in the US has been trending upward for much of the last four decades. This rise in inequality is characterized by a pattern in which the bottom half of the income distribution has remained stuck in place and the richest Americans have pulled away from the rest. To explain these changes, economists have emphasized dynamics associated with labor markets, demographic trends, globalization, technological change, and other broad socioeconomic forces. More recent work by political scientists suggests that shifts in the American landscape of politics and power has played a fundamental role in the rise of economic inequality. This work, primarily focused on the national level, has underscored how policymakers have responded to the interests and preferences of the more affluent while disregarding the interests of the poor. But research has yet to address the ways that patterns of economic inequality may have been shaped by state and local policy differences, and it has yet to pay attention to relations between racial and ethnic groups as a possible source of policy difference. This raises a number of unanswered, but important questions: Are there important variations in inequality at the state level? To what extent can state-level differences in inequality be traced to policy differences between the states? And how do issues of race factor into the state-level policies that shape inequality?
To address these questions, Joe Soss and Sarah Bruch propose to examine state-level variations in economic inequality over the period from 1990 to 2012. Because state governments control a variety of policies that structure distributive outcomes, Soss and Bruch argue that by taking advantage of variation across both states and time, scholars can construct far more powerful empirical tests of competing explanations for national trends. They propose to structure their project into two distinct phases. In the first, they will focus on state-level variations in economic inequality and consider how policy differences among states influence levels of inequality. In the second phase, the project will explore the role that racial factors play in shaping state policy and the impact of those factors on economic inequality.
In the first part of the project, Soss and Bruch want to understand how economic inequality in the U.S. varies across states and time. Do trends in economic inequality reflect a broadly-shared national experience, or very different state-level patterns, and how do these trends vary over time? They will then conduct a detailed examination of whether and how state policies matter for levels of economic inequality. To do this, the PIs propose to analyze four policy areas that have been linked to economic outcomes and inequality: labor market rules, penal policies, social welfare, and tax policies. Labor market rules, such as minimum wage and right-to-work laws, directly structure the distribution of wages across workers, and the division of revenues between workers and employers. Criminal justice policies and penal systems, controlled primarily at the state level, can tighten labor markets through mass removals to prisons, contribute to a depreciation of human and social capital, and stigmatize job-seekers with criminal records. States also enjoy substantial latitude in structuring social assistance policies and the social safety net is a key redistributive mechanism. Finally, tax policies – from income taxes to sales and property taxes to “tax expenditures” in the forms of credits and deductions – all affect levels of inequality.
In the second phase of the project, Soss and Bruch plan to explore the role of race in shaping economic inequalities at the state level. Race has been shown to be a central determinant of many state-level policies, and they will start by looking at the role and importance of racial relations among the many factors that influence those policies. They will then examine the question of how state policy choices affect economic inequalities within and between racial groups. In these analyses, they hope to specify which kinds of inequality (within-racial-groups, between-racial-groups, or total-population) are affected by which kinds of policy choices. As an example, they suggest that tax policy may be more important in predicting overall economic inequality, but because of the disproportionate incarceration of minorities, penal policy may have a greater effect on interracial inequality.