I’m concerned about economic inequality. I teach a class about it.I wrote a book about it. Recently, however, two different arguments have emerged with seemingly similar conclusions. The bottom line is that economic inequality has not increased as much as conventional wisdom suggests.
Although these two arguments have the same meaning, they look at very different endpoints of the income distribution.
first Focusing on the bottom 20 percent of household incomes, reduction In inequality. Importantly, the bottom class has actually caught up with the middle class over the past 40 years due to increased government transfers.of second argument It focuses on the top 1% of the income distribution. The report argues that estimates of the top 1 percent’s income share may overestimate the growth in that share and, therefore, the rise in inequality.
I don’t necessarily agree with either of these arguments. Over the past 50 years, the social safety net has expanded: reduce poverty And compared to the middle class, the bottom 20% will benefit. And it’s difficult to calculate the top 1%’s share of income because most household surveys leave the top 1% out.that Assumptions required, and those assumptions yield different growth estimates. I don’t know which group is right, but that’s what they say. a lot growth and things to say few — I know enough to admit that I don’t know.
So if I don’t agree with these arguments, why am I writing this? Because focusing on the two extremes of the income distribution takes away from the real story of middle class stagnation over the past 50 years. This is because I think it will deviate. Indeed, thanks to government programs, the bottom class has caught up with the middle class. But the other part of the story is that because the incomes of the middle class aren’t growing at all, the bottom class is also catching up.
The diagram below illustrates this point. It shows how GDP per capita, median incomes for female and male full-time workers, and median incomes for black and white households have increased since 1975. Although per capita income in the United States has nearly doubled over this period, it will not be the same. That’s what the person in the middle says.
Actual median income of working men decline. And the median number of working women has increased, largely because their educational and occupational backgrounds have expanded rapidly. In any case, despite these gains, they were unable to keep up with economic growth or fully catch up with men. Today, the gender pay gap still exists. 83 percent.
The situation at the household level is also not very good. Median income for white households increased by about 25%. Growth among black households was even slower.Yes, since 1975, the black-white household income gap has I grew up. And those who make the first argument above could rightly point out that my numbers don’t take into account non-cash safety net programs like food stamps or Medicaid, but in any case, households’ The median does not receive these programs.
Source: GDP per capita and CPI-U data are from Federal Reserve Economic Data (FRED). Median household income and personal income data were calculated by the authors from the University of Minnesota’s Integrated Public Use Microdata Series (IPUMS) version of the Current Population Survey.
These data contain economic questions that demand answers.Why doesn’t the labor market provide economic growth for middle-income men? Why can’t middle-income women outperform the economy, despite significant increases in human capital? Women Why are household budgets not growing as much even though black incomes and labor force participation rates have increased significantly? And why are black households actually lose Ground?
Economists know the answers to some of these questions. technology, trade And that increase in power It is likely that all of the largest companies in the world play some role in suppressing median wages.Women have to trade their wages. flexibility Because I have nursing responsibilities.of decline of marriage The middle class, driven at least in part by men’s economic performance, means there are fewer dual-earner households than there would be otherwise.And black households continue to face challenges such as: discrimination,Harmful human capital gap Financial conditions for marriage more severe Even more so than in white families.
These issues require some consideration. Do we need to plan for the impact of AI to prevent the loss of another 40 years of middle-income income? Universal pre-K will help children achieve better grades and allow mothers to work more if they want. Would it help you earn more? Would you want to change housing policy to increase opportunities for Black households to close the racial income gap?
Conversations like this are worth having, but they won’t happen if people mistakenly think the problem is resolved.
Jeffrey Sanzenbacher is an associate professor of practice at Boston University, where he teaches a class called “The Economics of Inequality.” He is also a research fellow at the Boston University Retirement Research Center.
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