Income Inequality: Myth And Reality

The Washington Post has an interesting article on income inequality. It mostly focuses on executive compensation and the explosion in such over the past few decades. I’m not at all unsympathetic to the point it makes, repetitiously, that the bucks executives are taking home is completely out of whack.

There was, however, one passage which rankled me. Here it is:

Income inequality has been on the rise for decades in several nations, including the United Kingdom, China and India, but it has been most pronounced in the United States, economists say.

In 1975, for example, the top 0.1 percent of earners garnered about 2.5 percent of the nation’s income, including capital gains, according to data collected by University of California economist Emmanuel Saez. By 2008, that share had quadrupled and stood at 10.4 percent.

The phenomenon is even more pronounced at even higher levels of income. The share of the income commanded by the top 0.01 percent rose from 0.85 percent to 5.03 percent over that period. For the 15,000 families in that group, average income now stands at $27 million.

In world rankings of income inequality, the United States now falls among some of the world’s less-developed economies.

Well, let’s take a look at how the US economy stands up to some of the new economic tigers. This is from a post I wrote a couple of months ago and from a post by Alex Tabarrok at Marginal Revolution. Take a look at this chart:


Now, I don’t know which countries the Washington Post had in mind when it stated that “… In world rankings of income inequality, the United States now falls among some of the world’s less-developed economies.”  but it would sure help if they had identified them. Until they do, the facts indicate that the US has done a fairly remarkable job of distributing wealth throughout the populace.

Is income inequality a reality? Yes, of course it is, always has been and always will be. Is inequality increasing? Probably. Is this a problem? Once again, probably, but the causes are far from clear. Some clear understanding of the underlying trends driving the gap should be a precursor to any efforts to reverse it.

So read the article. It has lots of good points. Just ignore their kowtowing to the Left and its unremitting efforts to prove that this country is an economic dictatorship grinding the worker under its thumb and desperately in need of a Progressive technocratic reordering.

You can leave a response, or trackback from your own site.

Leave a Reply