Income Equality

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Income Equality

Postby Zarniwoop » Thu Jun 07, 2018 10:21 am

Good news for everyone I think....the recent growth in income inequality has not only lessened, if you include public transfers of wealth, it has actually reversed


There's good news on income inequality that nobody's talking about. The income gap between America's wealthiest and poorest people has generated a lot of attention and fueled a resurgence in left-wing activism and interest. But what hasn't grown in recent years is income inequality itself.

A recent report from the Congressional Budget Office (CBO) looked at U.S. income data from 1979 through 2014. For most of this period—between 1979 and 2007—the gap between the country's lowest and highest earners widened at a steady and relatively rapid pace.

This held true whether CBO looked at "market income" (employment and other earnings before taxes are taken out or public-assistance funds added in), income after taxes, or income plus government benefits (including social insurance programs like Social Security and means-tested programs like "food stamps").

In 2007, however, this trend came to a halt. After that, income inequality either grew much more slowly or even decreased, depending on how you slice the data. Measuring market income, the income gap was 3 percent higher in 2014 than in 2007 (compared to an average 1.3 percent increase per year over the larger period). With public benefits included in the calculation, income inequality actually shrank.



But by Strain's calculations, income inequality is waning, whether we use the CBO methodology or another estimate.

Another measure of inequality is more straightforward than the "Gini coefficient" used by the CBO, and considers only labor-market earnings. It begins by ranking workers by how much they usually earn each week. Take the worker who earns more than 90 percent of all workers. Now take the worker who only earns more than 10 percent of workers. Compare their earnings.

If the rich are getting richer, then "ninth decile" workers will earn increasingly more than "tenth decile" workers. This is exactly what was happening until recently. In the late 1990s, the ninth-decile workers earned about 4.5 times as much as the tenth-decile workers. This shot up to 5.2 times as much by 2012. But over the past six years, inequality has stabilized, echoing the findings in the CBO report.

Looking at household income data from 2014 alone, the CBO found that average yearly income among the lowest-earning quintile was around $19,000. Among the highest earners, it was $281,000. "Means-tested transfers and federal taxes cause household incomes to be more evenly distributed," the office reports.

In 2014, those transfers and taxes:

Increased income among households in the lowest quintile by $12,000 (or more than 60 percent), on average, to $31,000.
Decreased income among households in the highest quintile by $74,000 (or more than 25 percent), on average, to $207,000.






For those of you who prefer pictures and understand what the Gini coefficient is:

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Re: Income Equality

Postby Mountaineer Buc » Thu Jun 07, 2018 10:31 am

Counterpoint from Kevin Drum at Mother Jones.

Income Inequality Is Still Growing the Same as Always

Kevin Drum Jun. 7, 2018 11:11 AM

Over at National Review, Michael Strain chides Democrats for continuing to be obsessed with growing income inequality:

Income inequality has been growing at a much slower pace over the past ten years. Has anyone noticed? Beyond stabilizing, according to some measures, inequality has actually fallen since the beginning of the Great Recession.

Hmmm. The single best source for a quick but rigorous look at income inequality is the Congressional Budget Office. Their latest report on income distribution goes through 2014 and it looks like this:
Image

Technically, Strain is right. Compared to the beginning of the Great Recession, income inequality is down. But come on. It’s true that rich people took a big hit in capital gains income when the housing bubble imploded, but they’ve taken hits like that before and they’ve always bounced back. The same thing has happened this time. After a big loss, the rich began bouncing back almost immediately. Since 2010, their incomes have gone up by nearly half while the incomes of everyone else have declined. There’s no special reason to think this hasn’t continued since then. Most likely, income inequality in 2018 is higher than it was even at the height of the housing bubble.

There are ways to make this picture look better. If you include income from social welfare programs, incomes of the non-rich have been flat since the Great Recession, not down. Is that solace? Maybe a little, but not much.

Basically, the trendline showing the incomes of the affluent is an inexorable upward line since 1980 with a couple of spikes during the dotcom and housing bubbles. It just keeps rising and rising, and it’s still rising today. That said, I partly agree with Strain’s conclusion:

Part of the reason inequality features so prominently in the national conversation may have less to do with the rich and more to do with the lack of employment opportunities (until very recently, at least) and income growth experienced by many Americans….[Since 2007] median income grew by just 0.2 percent per year. It’s understandable to conclude, correctly or not, that others are doing better than you if your income is growing that slowly.

Whether the size of the gap matters more than the absolute economic condition of non-rich Americans is critical. Each implies different policy responses that are often in conflict.
If the gap matters, then policies that shrink it are good. For example, raising the minimum wage to $15 per hour and significantly strengthening labor unions may be good, because they will raise the earnings of many incumbent workers. But if we care about the economic condition of lower-income Americans, then these policies are counterproductive because they will reduce their employment opportunities. In the conflict between promoting income equality and increasing employment opportunities for lower-income Americans, I side with employment.

I agree that income growth for middle-class workers is ultimately more important than than raw income inequality. However, I very much doubt that labor unions and higher minimum wages are, on net, bad for the middle class. The disemployment effects of these policies appear to be pretty low, which the income-enhancing effects appear to be pretty large. I’m happy to consider other policies too, such as job subsidies, but the perfect should never be the enemy of the good. Nearly every policy worth its weight in white papers has some drawbacks. In the end I vote for all of the above: higher top marginal taxes, increases in the minimum wage, more union power, job subsidies, and anything else we can think of.
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Re: Income Equality

Postby Zarniwoop » Thu Jun 07, 2018 10:39 am

When we get more recent #'s we can test his theory

interestingly enough his graph shows that the bottom quartile is growing much faster than the middle
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Re: Income Equality

Postby Mountaineer Buc » Thu Jun 07, 2018 10:49 am

Zarniwoop wrote:When we get more recent #'s we can test his theory

interestingly enough his graph shows that the bottom quartile is growing much faster than the middle

But it also shows where all the post recession economic growth is going.

Are you determined to ensure I get no work done today? :D
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Re: Income Equality

Postby Zarniwoop » Thu Jun 07, 2018 11:00 am

Mountaineer Buc wrote:
Zarniwoop wrote:When we get more recent #'s we can test his theory

interestingly enough his graph shows that the bottom quartile is growing much faster than the middle

But it also shows where all the post recession economic growth is going.

Are you determined to ensure I get no work done today? :D




The article I posted which relies on CBO data shows the opposite...since 2010 (post-recession) the gap is closing.
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Re: Income Equality

Postby Mountaineer Buc » Thu Jun 07, 2018 11:21 am

Zarniwoop wrote:
Mountaineer Buc wrote:But it also shows where all the post recession economic growth is going.

Are you determined to ensure I get no work done today? :D




The article I posted which relies on CBO data shows the opposite...since 2010 (post-recession) the gap is closing.

Pardon me.

where most of the economic growth is going. "All" is an incorrect statement.
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Re: Income Equality

Postby Zarniwoop » Thu Jun 07, 2018 11:51 am

I'm not entirely sure how that statement corresponds to the data I posted that shows the gap is closing...it's going to the top earners at less of a differential rate than it has in the past...which I think we would all agree is a good thing, no?

Its obvious that from a absolute perspective the wealthy will regain much more wealth after the recession than the poorest because they would have lost the most in the recession. And even if you are simply talking about income....if a guy makes $500,000 and gets a 1% raise, it's $5,000. If a guy makes $20,000 and gets a 2% raise, it's $400. Guy 1 got more absolute wealth even though guy 2 got a higher raise. Until guy 2 earns more than guy 1, guy 1 will always be accumulating more wealth.
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Re: Income Equality

Postby beardmcdoug » Thu Jun 07, 2018 12:53 pm

Yep you ain’t gettin **** done :D
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Re: Income Equality

Postby Caradoc » Thu Jun 07, 2018 2:28 pm

Income inequality and wealth inequality are completely different things. The actual difference in wealth between richest and poorest has been declining for about a century now.
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