I was quite surprised when I was led to a NY Times article yesterday by a particularly astute (and younger) former colleague of Ellen’s (thanx Matt Stoller) that basically said what most people think is the case about the rich getting richer and the poor getting poorer is not the case.
At least not since 2007.
The article tells us that even though income inequality is high historically, “The income of the top 1 percent – both the level and the share of overall income – still hasn’t returned to its 2007 peak. Their average income is about 20 per cent below that peak.”
While this may be more of a statement about who lost more in the period between 2007 – 2010, there is much in this article that is worthy of consideration.
Take a look at the article for yourselves:
Inequality Has Actually Not Risen Since the Financial Crisis, by David Leonhardt, NY Times, Feb. 17, 2014, p.3.
Ben Shute said:
Yes, but it’s important to remember that in any such analysis, the choice of the beginning point makes a tremendous difference.
And there needs to be clarity about what is being measured. Piketty, if I understand him, uses wealth (capital), not income, and covers the entire time span for which data is available.
Bob T said:
This is an interesting article and I’m glad you brought it up. My question is: how much does this matter? I understand that the top 1% lost a much greater percentage of their incomes since 2007 than the rest of us, and that the gains they have made since have been dramatic but still leave them below the 2007 level.
Wait a minute! Isn’t it a little disingenuous to make this comparison using just percentages, when we are comparing folks who could lose a huge percentage of their income and still be way better off than folks who are just scraping by and cannot afford to lose anything?
David Leonhardt’s article does acknowledge that, despite this revision of current interpretation by Steve Rose, “Inequality is far higher than for most of the last century.” I certainly agree that we have to use real information in discussing and thinking about these matters, so it looks like we need to dismiss the claim that inequality has gotten a lot worse since the great recession. But where does that leave us? Apparently, by some measures, approximately where we were during the gilded age of the late 19th century.
This article makes a good point when discussing the ability of government to cushion the worst effects of inequality and, to some extent, reduce that inequality through tax policy. I wonder how much of that will happen over the next few years.
Again I say it’s a good thing to correct misunderstandings and misinterpretations, and I applaud Steve Rose’s research and Leonhardt’s NY Times piece about it. But don’t we still have an economy with such a huge gap between rich and poor that it really doesn’t work for most people? A gap not just in income, or in wealth, but a gap that shows up when you look at housing, or education, or a person’s chances of finding a fulltime job (never mind a satisfying or fulfilling one!).
Richard said:
Ben, Bob, and others that wrote to me directly:
Definitely statistics can have many different meanings depending upon how they are calculated, the periods they cover, etc. And I think Leonhardt makes it clear that he is using a very short, specific time period and acknowledges that income inequality remains at near record levels.
And as one reader wrote me directly,” a drop in middle class income hurts more then a drop in very wealthy income.”
Maybe what most interested me about the article had to do with his analysis that the government has and can play a role to cushion some of the effects of the inequalities.