Wednesday, October 29, 2014

Quotation of the day on income inequality…..

Quotation of the day on income inequality…..:

…. is from David Brooks, writing in the New York Times last week in his column “The Working Nation“:

Today, too many people are focused on the top 1 percent. But, as economist David Autor has shown, if you took all the wealth gains the top 1 percent made between 1979 and 2012 and spread it to the bottom 99 percent, each household would get a payment of only $7,000. But if you take a two-earner, high-school-educated couple and get them college degrees, their income goes up by $58,000 per year. Inequality is mostly a human capital problem.
MP: In the discussion on income inequality and various categories like the “top 1%” or the “top 5%” or the “bottom 20%” it’s important to note that Census Bureau data reveal a remarkably constant share of US income going to the top 5%, the top 20%, and the bottom 20% for the last 20 years, see chart above. The Census Bureau doesn’t provide data for the top 1% but the share of income going to its highest income category — the top 5% (brown line in chart) — was 21% in 1993 and increased only slightly to 22% by 2000, and it’s remained at that level for more than a decade. Likewise, the shares of income going to the top 20% (red line) and bottom 20% (blue line) have been remarkably constant over the last 20 years. So if there has been a major increase in income inequality, which is what everyone believes, it’s sure not showing up in the Census Bureau data on income shares. If there had been a significant increase in income inequality over time, shouldn’t the share of income going to the top 5% of the highest-income Americans be going up, instead of remaining flat for more than a decade?

See previous CD posts on the “imaginary hobgoblin of rising income inequality” here and here.