Rich Americans have been getting richer while poorer households lag in terms of income growth – and the trend’s not expected to slow anytime soon.

The top 20 percent of the highest income households in the U.S. experienced 60.6 percent of total wage gains between 2005 and 2012, and the top 5 percent overall captured 27.6 percent of total gains, according to a report Monday from the U.S. Conference of Mayors and IHS Global Insight.

Median household incomes will rise by 2.5 percent in 2014, then by 3.8 percent a year through 2017, according to the report. But mean household pay will climb 2.7 percent in 2014 and by 4.1 percent in 2017, meaning the middle class will continue to stall as wage growth goes to more affluent households.

Despite the fact that the U.S. economy has regained all of the jobs lost during the Great Recession, from December 2007 through June 2009, household wages overall have yet to show similar improvement.

“Fewer people are working than would otherwise be working in a healthy economy and thus, household incomes are lower than they would be,” says Jim Diffley, director of U.S. regional economics at IHS Global and author of the report. “We’ve just passed this spring a low hurdle in terms of the recovery, and that is we finally have as many jobs in the U.S. as there were in the beginning of 2008. That’s the lowest possible hurdle because after all, unemployment is still high because the labor force has grown.”

According to the Labor Department, the jobless rate was 6.2 percent in July, and businesses added 209,000 workers, representing the sixth straight month of job gains greater than 200,000. The Economic Policy Institute estimates that given the pace of population growth since the recession, in July there were 5,860,000 “ missing workers,” which include potential workers who aren’t in the labor force – many because they’re discouraged. EPI estimates if these workers were looking for jobs, the actual unemployment rate would be about 9.6 percent.

The jobs regained since the recession have, as a whole, been lower paying than the ones lost. According to the IHS report, the average annual income of jobs lost between 2008 and 2009 was $61,637, while the average for those gained through the second quarter of 2014 was $47,171. This amounts to a wage gap of 23 percent and $93 billion in lower wage income.

Furthermore, the top 20 percent highest wage households saw their incomes rise faster – by 51 percent – in 2012 compared with 43.6 percent in 1975, and growth was even greater for the top 5 percent of wealthiest Americans. At the same time, the bottom 40 percent of households received just 6.6 percent of all pay gains since 2005, and 9.5 percent of gains since 1995.

Jobs in low-income fields such as hospitality, which pay around $21,000 a year, replaced jobs lost in high-paid sectors such as manufacturing, which pay $63,000, the report found. “You want to look at the higher-wage sectors – professional, scientific, technical workers, manufacturing,” Diffley says. “You sort of discount the leisure and hospitality. Although, not to say they’re not important, but they’re less important in terms of generating income.” Economists and other labor market watchers look for the quality of jobs added, not just the quantity, in monthly jobs reports from the Labor Department.





Diane Swonk, chief economist at Mesirow Financial, called the July job gains in higher-wage business services such as legal and engineering “meat on the bone” for the labor market recovery.

“This is particularly important for new college graduates, as it suggests that the market for individuals with higher education is finally firming,” Swonk wrote in an Aug.1 blog post.

The federal minimum wage of $7.25 is the full-time equivalent of $15,080 a year, the report showed, and in terms of purchasing power, is below its 1968 peak of $10.69, or $22,235 a year. This represents a 32 percent erosion of the minimum wage worker’s pay.

As of Aug. 1, 23 states and the District of Columbia have minimum wages higher than the federal minimum wage, account to the National Conference of State Legislatures.

A new study from Standard & Poor’s Capital IQ – a financial information provider – argues that income inequality restrains growth in the U.S. In fact, according to the study, one more year of education for the U.S. workforce would result in productivity gains of about $525 billion to the economy over the next five years.

The IHS report was released in conjunction with the inaugural meeting of the USCM Cities of Opportunity Task Force in New York City, and more than 30 mayors from around the country are expected to attend.