Skip to comments.The Mystery Of Income Inequality Broken Down To One Simple Chart
Posted on 03/29/2013 5:40:33 AM PDT by SeekAndFind
In a March 18 post on his Economics One blog, John B. Taylor published the very illuminating chart reproduced below.
The chart, which is based upon IRS data complied by economist Emmanuel Saez, shows that (at least in absolute terms) rising inequality hasnt even benefited the so-called rich. They, like the rest of America, would be better off today if the government policy errors that led to the increasing income disparity had not occurred.
From 20 feet away, anyone can see that something bad happened to the U.S. economy in 1968. Prior to that, America experienced rapid income growth that was widely shared. The incomes of both the ten percent and the ninety percent increased by 80% in just 20 years. We had prosperity, without rising income inequality.
This 21-year golden age then gave way to 14 years of income stagnation, which was also widely shared. Incomes didnt rise, but neither did income inequality.
Then something good (but not great) happened around 1983 that got incomes growing again, but not nearly as fast as during 1948 1968, and at the cost of rapidly widening income inequality.
After that, something bad happened circa 2000, leading to another 12 years of income stagnation for both the ten percent and the ninety percent. This brings us to the present.
Note that even though, as of 2011, the income gains of the ten percent since 1948 have far outpaced those of the ninety percent (205% vs. 72%), the ten percent would have been much better off in absolute terms if the 1948 1968 trend had continued. In such case, the incomes of both groups would have risen to about 270% above their 1948 levels. Americas real GDP (RGDP) would have been 84% (more than $13 trillion) higher in 2012.
(Excerpt) Read more at forbes.com ...
Good read. Bump.
rate of income change
Saez is a lier. Anything with his name on it is pure bs
Pretty good article, It is almost as if Forbes now believes that Official Counterfeiting and Enslaving our Children and ourselves in perpetual DEBT that can NEVER BE PAID, As an acceptable Economic Policy is bad.
RE: Saez is a lier. Anything with his name on it is pure bs
Can you elaborate as to why he cannot be trusted?
This chart doesn’t show the real story, I was born in 1944 and graduated from a public high school in 1962. By the time I turned 23 people were asking me to my face what was wrong with me because I did not have a wife AND CHILDREN already. I had an honorable discharge from the Navy, a Navy electronics diploma and was working in an engineering department at a bearing plant, driving a new car and earning an above average income but people were starting to consider me a failure or worse because I was single at 23. The “norm” for that time in this area would have been for a 23 year old white mail to have a job in a textile mill, be married and have at least one child and, if not owning a home, renting a single family home and making plans to buy one. How do you reconcile that with the current situation?
The author is one of many bloggers on the Forbes.com website - his opinion is not necessarily that of Forbes.
Imagine you won the lottery, and decided you would take $100,000 and donate it to help “the poor”.
And you hired someone to handle it.
And then at the end of 1 year you asked how he did- and he said “Well I gave away $30,000 to one family and I paid myself $70,000 to run the program”
You would be Furious.
Well that is EXACTLY what the government does with Welfare.
The next target for the global corporatists is white collar labor. Expanded guest worker visas and more educated permanent immigrants will reduce wages further.
Yeah, the nation had just endured 4 years of Johnson!
I'd like to see a chart showing the "percent change" in unearned income that the freeloading sector gained over those same years. I'll bet that welfare-type income has risen enormously since 1964.
I'd also like to see the "after tax" income rather than gross income. Money stolen by the government should not be considered income.
Part of the widening is due to a basis change in 1986. After the Tax Reform Act of ‘86, the figures include many S-corps filing individual returns. Also since then muni income has had to be reported - even if not taxable.
People like John Kerry (who holds hundreds of millions in munis) can really distort the figures.
Comparing pre and post ‘86 tax return data is bogus.
“....something bad happened to the U.S. economy in 1968....”
The accumulating effects of the Johnson’s “Great Society” and the Civil Rights Act of 1964 (affirmative action, etc.) began to reach a “tipping point”. The number of non-productive (or minimally productive) members of the workforce began to increase as a percentage of that workforce. The Era of the Slacker/Entitled arrived.
Aw crap, by this chart I’m in the top 10 percent. Now I’ll have smelly OWS-ers on my lawn.
My guess is that the top ten percent of earners always do well, no matter what the overall economy is doing.
Consider two of the points in time the author identifies as important. First, what happened around 1968 that had implications for the average worker’s income? The introduction of large gov’t social programs around 1965 and spending on the Vietnam conflict were noteworthy. The unpleasant end of a popular trend toward stock market investing was coming at this point. There was a change in American culture toward more single parenthood and welfare dependency that changed the extent of self-reliance and began the two-income household trend. In addition, US economic strength following WW2 was beginning to face strong international competition from both Europe and Japan. All of those factors had economic implications. The international competition in labor costs would hit those workers whose labor was exposed to international competition—thus you see a divergence in income with the more educated people maintaining income growth at a rate higher than those whose (low tech manufacturing) jobs could be done elsewhere.
In 1983 you see the introduction of the microprocessor into broad technological development and the associated growth in educated tech labor wages. You also saw tax reforms and an increased interest in entrepreneurship. US manufacturing began to compete more directly with international competitors such as Japan. This favored the more educated workers.
So is suggesting that all kinds of income are included in that taxable income that the IRS works with.
Another thing that's bogus is not saying if it's total income for the growing population or if it's per capita income. The big part of the lie is seen when we look at total incomes from from the BEA --here's the after tax real income per person both taxable and not:
The goofy article says total real incomes were flat since the mid '90's. It's not true --they're up 30%-- and my guess is if he doesn't know he's posting a lie then he should know it. Regardless, reality is that after tax income per person adjusted for inflation was growing steadily until the policy changes after the '06 & '08 elections.
Dr. Sowell's book Economic Facts and Fallacies and the book he heavily references, Alan Reynolds Income and Wealth do a better job that my feeble attempt, but the short answer is that Saez (and Piketty and Wolfe) take income numbers for various groups and ADD as much as they can to the upper income and SUBTRACT as much as they can from the lower earners to build a false impression. Further, they ignore changes in the type of income reporting - such as the S-Corp laws that changes the way income for corporations was reported in the '80s - They ignore the threshold fallacy, they mix the definition of mean average and median average when it supports their deception, they use various inflation adjustment formulas to paint the picture they want, and on and on.
The Sowell book does a great job of unmasking these false studies, but I wanted to check sources so I looked at the Reynolds book (and the direct sources he cites). The Reynolds book is much, much drier than Sowell, but it really decimates Saez.
Since reading these books, I am amazed at how often Piketty, Saez and Wolfe show up as source material for the latest "income inequality" crusade that comes from the left. Why we don't call these guys out is beyond me.
My take too. I also fail to understand why anyone here takes their nonsense seriously.