Is Income Inequality Expanding? (Yes.)

According to the Economic Policy Institute, a non-profit, non-partisan think tank that “believes every working person deserves a good job with fair pay, affordable health care, and retirement security” (agreed!), wage inequality has expanded during 2009-2011 economic recovery. Here’s a chart:

The top one percent saw their wages drop dramatically during the recession (see: the riches to rags story in The Queen of Versailles), but have seen gains during the recovery years (see: this follow-up to the Versailles documentary). The bottom 90 percent, on the other hand, has seen nothing but erosion when it comes to their wages. :(

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10 Comments / Post A Comment

kellyography (#250)

This reminds me of the time a couple months ago that I got a 3% raise, and then on January 1st, my FICA taxes went up 2% and my health care went up a whole bunch so now I’m making less than I did before I got a raise.

honey cowl (#1,510)

@kellyography This reminds me of the time I got pay cut for the new year! At least it’s better than being laid off.

deepomega (#22)

This is well and good, but it’s also not the whole story. A better metric would take into account real cost of living changes. If wages rise slowly but cost of living drops dramatically, that’s gonna have a more marked effect on low income earners.

(Not saying we don’t have an income inequality problem, just that this isn’t a very great measure of it.)

@deepomega The word “real” means that the numbers are already adjusted for inflation, i.e. CPI (or GDP deflator depending where the numbers are from), i.e. change in cost of living.

deepomega (#22)

@stuffisthings CPI is a shitty metric though. I know it’s better than nothing but it’s a really lousy indicator of what, you know, living actually costs.

@deepomega Yes but the biggest problems with CPI are that core CPI excludes fuel and food, both of which have increased in cost in recent years, and also that it may understate the effects of technological change. So unless you think having a real neat iPod makes up for 30 years of stagnant real wages, it’s unlikely that measurement error in CPI is enough to make up for the dramatic increase in inequality. Plus CPI rarely differs all that much from the GDP Deflator, a much more accurate measure of the current prices of all goods and services produced.

deepomega (#22)

@stuffisthings No, it also doesn’t account for escalating quality of goods. E.g. housing getting bigger/roomier, electronic goods getting cheaper, etc. Like, your tsarist russia comment below highlights this. Even with huge income inequality, the quality of life for the bottom quartile of earners is far, far higher than it was 50 years ago.

Wait a sec, the one line that matters is “since recession began” which seems to imply the income inequality has actually shrank since 2007?

Mike Dang (#2)

@forget it i quit Yes, so this is the bullet from the report about that:

• Wage inequality grew substantially over 1979–2007, lessened in the 2007–2009 downturn, and began expanding again in the 2009–2011 recovery. Trends over the next few years will determine whether wage inequality returns to or exceeds the heights reached in 2007 or 2000—or simply remains far higher than at any time in the 1980s and 1990s.

@forget it i quit The problem is, when the economy shrinks, the top 1% lose more than everyone else — but not THAT much more. When the economy grows, almost all of that growth accrues to the top 1%. Multiply this over a couple decades, and you can start to explain why 21st century America has Tsarist Russia levels of income inequality.

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