8 ms·

US Income Inequality: All for the Top 1%

114 points by o- 9y ago

rafiki6 9y ago
When inequality grows, empires shrink and eventually disappear: https://www.theguardian.com/business/2012/feb/05/inequality-leads-to-economic-collapse https://www.theguardian.com/business/2012/feb/05/inequality-... And let's not kid ourselves. Those on top intend on staying there by growing the gap.
- dsacco 9y ago
  I don't really understand how that article by the Guardian supports your thesis that, "when inequality grows, empires shrink and eventually disappear." What do you mean?
  - rafiki6 9y ago
    What's not clear...it's even in the title. Inequality leads to economic collapse. Here's the end of the article "An economic model that allows the richest members of society to accumulate a larger and larger share of the cake will eventually self-destruct. It is a lesson that is yet to be learned." Generally any state, nation or empire is heavily dependent on a having a strong and healthy economy to remain stable...
arcanus 9y ago
Real title was, 'Our Broken Economy, in One Simple Chart'. Despite some of the recent coverage, this chart indicates that gains are not going to the top 20%: they are going to top 1%, and particularly <1%. To be clear, this is not many programmers: "In 1980, the top 1% of adult earners in the U.S. made $420,000 a year, on average (before taxes and measured in 2014 dollars) — 27 times as much as the average for the bottom 50% of earners. Today the top 1% of earners make an average of $1.3 million a year — 81 times as much as the average for workers in the bottom half." HBR also found that gains are increasingly going to the top firms: there is a global set of winners and losers. Inequality is growing everywhere, in all fields. https://hbr.org/cover-story/2017/03/corporations-in-the-age-of-inequality https://hbr.org/cover-story/2017/03/corporations-in-the-age-...
- frgtpsswrdlame 9y ago
  I'm not sure we can just blame this on the tiny minority of mega-rich at the top. The whole inversion of the curve is cause for alarm. The chart is great but it seems like everyone's eye is catching on that crazy portion on the far right. Not only do we have to bring that down, we need to grab the line at 5% and start yanking it up. That's probably going to require policies and taxes that not just the 1% but the 20% as well don't like. EDIT: I'd also like to plug this really great article on regional inequality which is a huge problem but usually goes unmentioned in these sorts of discussions: http://washingtonmonthly.com/magazine/novdec-2015/bloom-and-bust/ http://washingtonmonthly.com/magazine/novdec-2015/bloom-and-...
  - cristianpascu 9y ago
    If the inequality is artificial, it might be that an artificial intervention will reverse it. If it's not, than so God help us. A democratically "elected" Robin Hood will probably just take a lot from the rich and give a little to the poor to keep being "elected" democratically. On another side of life, the moment people have enough to pay the bill, anything more will not make them any happier. Leveling the income or the wealth is not doing anything effective to increasing happiness. What's and where's the problem of inequity? The fact that I can't afford a luxurious yacht trip?
    - frgtpsswrdlame 9y ago
      What is "artificial" in your mind?
    - AstralStorm 9y ago
      The actual problem is working long hours when you could be working short hours for the same pay, freeing time for both enjoyment, well being and creativity. Rich can also afford to hire servants and employees to do things for them. They can also afford expensive extra things or medical procedures without getting bankrupted. Capital such as factories, research facilities. Teams to manipulate both common people (marketing) and politicians (lobbyists).
  - 9y ago
gallerdude 9y ago
It's an interesting question. Most of peoples incomes are rising, it's just whose incomes are rising more than others. Is that still fair?
- 1001101 9y ago
  No, it's not fair. If you're an anarcho-capitalist, "what is this minimum wage thing?," if you're a communist "seize the means of production!"
  - swiftting 9y ago
    If you're an anarcho-capitalist, "what is this minimum wage thing?," I thought eliminating the minimum wage was a common sense libertarian ideal. Google Economist Walter Williams!
- peatmoss 9y ago
  Economists don't generally buy the buy idea that you can make some people better off without making others worse off. In short, if all the gains happen for one group, even if the other group isn't directly losing money, their purchasing power will be eroded by the rich. And I'll add that this sort of thing keeps stacking up, because as the rich continue to be able to buy up things like land at a higher rate than the poor, the rich are then able to extract even more money from the poor through rents.
  - logicchains 9y ago
    >Economists don't generally buy the buy idea that you can make some people better off without making others worse off. Which economists? Economists generally support freer trade, more open borders and the like because they see trade as fundamentally not a zero sum game: if two parties are willing to make an exchange, it must be because the exchange somehow makes them better off than they would be without it. All of developmental economics is built on this: it's why the majority of the world's population enjoy an incredibly greater standard of living than they did 100 years ago. Everyone is better off. Which is not to say there aren't situations where economists recognise trade-offs. For example, https://en.wikipedia.org/wiki/Factor_price_equalization https://en.wikipedia.org/wiki/Factor_price_equalization: a commonly accepted economic theory that proposes that international trade between poorer and richer countries will make unskilled wages in the poorer countries higher and in the richer countries lower.
alex98 9y ago
A great book on income inequality for those interested is Plutocrats by Chrystia Freeland.
tomtemplate 9y ago
"Most Americans would look at these charts and conclude that inequality is out of control. The president, on the other hand, seems to think that inequality isn’t big enough." Would nobody else reading this want some further information to back up this statement? Its a shame it wasn't nearer the beginning of the article as I could have stopped reading earlier.
- KZeillmann 9y ago
  It's literally in the preceding paragraph. Notes about how the proposed healthcare law was essentially a transfer of wealth from the poor to the rich, how the proposed tax cuts mainly benefit the richest Americans, and plans to cut school funding.
  - deleted 9y ago
    [deleted]
  - tomtemplate 9y ago
    "how the proposed tax cuts mainly benefit the richest Americans" Did you gather this view from reading the tax reform? https://assets.donaldjtrump.com/trump-tax-reform.pdf https://assets.donaldjtrump.com/trump-tax-reform.pdf
    - mcguire 9y ago
      "If you are single and earn less than $25,000,... you will not owe any income tax." In 2016, if you were single and made $25,000 your tax was $3290. The standard deduction for singles is $6300. Is there a trick here?
    - KZeillmann 9y ago
      End of the estate tax, end of the AMT, moving the top tax bracket from 39.6% to 25%, to start.
- deleted 9y ago
  [deleted]
- deleted 9y ago
PeachPlum 9y ago
If everyone gets 2x as much tomorrow as today, income inequality rises. Ask people if they would support everyone getting 2x their income tomorrow.
- kazagistar 9y ago
  Did you not understand the chart? Its a chart based on percent growth. ×2 across the board would be a flat line. Instead, the income of the ultra rich is vastly up, while for everyone else it is much smaller, not in terms of absolute numbers, but percentage.
- creaghpatr 9y ago
  Yes, this is how inflation is leveraged by those at the top to dilute the bottom 98%. People think in terms of dollars instead of purchasing power, the fed need only boil the water slow enough for people to remain compliant.
  - wonder_er 9y ago
    Not sure why the downvotes. Purchasing power is all that matters. Would you rather earn $1/hr or $15/hr? All that matters is what that money can purchase. This is the funny thing about our steadily increasing minimum wage laws. I've not seen many people discuss why purchasing power keeps declining. In 1990, $15/hr then was equivalent to $28.72/hr today. [0] Obviously, something is happening to purchasing power of our dollars, but it doesn't get discussed much. [0] https://www.dollartimes.com/inflation/inflation.php?amount=15&year=1990 https://www.dollartimes.com/inflation/inflation.php?amount=1...
- deleted 9y ago
  [deleted]
- Jack000 9y ago
  wait, wouldn't scaling income by a constant multiple be the same as not changing anything? Your income and expenses are both doubled. this would just kill the bank accounts of anyone holding cash.
autokad 9y ago
It looks to me that QE3 was a huge part of that later uptick. its no surprise to me that if you juice the markets and inflate asset prices (mostly stock), that the richest benefit most. what was surprising to me is how bad actually making stuff did. I understand that juicing the markets might not benefit that, but it seemed as though QE3 actually hurt producing tangible things.
- refurb 9y ago
  Exactly. The distributions looks reasonable until ~2008, when things go wonky. That coincides quite nicely with the bottom of the equities market and the subsequent bull run. Also, something seems off. The animated chart is not data for a given year, it's for the last 34 year ending in that year. Since you're averaging growth over 34 years, the only way the top percentile can go from 3% growth (over 34 years) to 5% is if you average in really huge growth. Also, the 34 year measurement makes me suspicious. Seems like an odd time period to capture. Maybe if you made it 30 or 40 years the data isn't quite so compelling?
  - joshmaker 9y ago
    From the article: > (The economists used 34-year windows to stay consistent with their original chart, which covered 1980 through 2014.)
  - lorenzhs 9y ago
    I think it's more likely that 34 years were chosen because 1980 - 34 = 1946 makes sense for a post-WW2 analysis. The graph doesn't vary wildly for most of the time (most of the change is a fairly smooth motion), so it seems unlikely that 30 or 40 years would change the conclusion. Note that a sharp rise in the curve can also be explained by bad years dropping out of the 34-year window. This would probably explain the increases in the 1%'s weath around 1992 and 2003 (1958 and 1969-70 recessions, respectively). See https://en.wikipedia.org/wiki/List_of_recessions_in_the_United_States https://en.wikipedia.org/wiki/List_of_recessions_in_the_Unit...
  - mcguire 9y ago
    Income inequality has been a visible problem for more than 10 years. Income Progress across the American Income Distribution, 2000-2005 (https://www.brookings.edu/testimonies/income-progress-across-the-american-income-distribution-2000-2005/ https://www.brookings.edu/testimonies/income-progress-across...) "Finally, incomes are growing less equal. Over the past quarter century Americans at the top of the income distribution have seen much faster income growth than people in the middle class. If average income grows 1% a year and top earners enjoy gains of 2% a year, many people in the middle and bottom will see their incomes grow much more slowly than 1% a year. Top income earners experienced sharp income declines in the last recession, but in the last couple of years their incomes have rebounded strongly. This reinforces the impression that the gains from prosperity have flowed disproportionately to people at the top rather than in the middle of the distribution." Income Gap Is Widening, Data Shows (https://mobile.nytimes.com/2007/03/29/business/29tax.html https://mobile.nytimes.com/2007/03/29/business/29tax.html) "Income inequality grew significantly in 2005, with the top 1 percent of Americans — those with incomes that year of more than $348,000 — receiving their largest share of national income since 1928, analysis of newly released tax data shows.'
humanrebar 9y ago
It's my understanding that there is some churn in the top 1% of earners. If the economy transitioned to a place where people had big spikes and dips in their annual income, couldn't the graph look the same? Doesn't that sound like a "gig economy"? In other words, why graph income and not wealth?
- nsebban 9y ago
  > In other words, why graph income and not wealth? I think it's because people's wealth is really hard to estimate. The border between people's assets and their companies', foundations' and what not are usually blurry enough that you would get a graph that shows no insight. Although income is not a great KPI, at least there are reliable methods to figure it out, or at least make estimates with a quite acceptable precision.
  - humanrebar 9y ago
    Sure, but there are downsides to this approach as well. Say someone could have a small business that takes off and retires after a few years with a reasonable retirement fund. This doesn't fit the mold of a hoarding 1%-er. It seems like discouraging this kind of income spike would actually decrease social mobility.
    - mcguire 9y ago
      https://www.theatlantic.com/business/archive/2016/07/social-mobility-america/491240/ https://www.theatlantic.com/business/archive/2016/07/social-... "“The probability of ending where you start has gone up, and the probability of moving up from where you start has gone down,” Carr said. For instance, the chance that someone starting in the bottom 10 percent would move above the 40th percentile decreased by 16 percent. The chance that someone starting in the middle of the earnings distribution would reach one of the top two earnings deciles decreased by 20 percent. Yet people who started in the seventh decile are 12 percent more likely to end up in the fifth or sixth decile—a drop in earnings—than they used to be."
      - 9y ago
spo81rty 9y ago
Any investor can make 4-6% annual gains in the stock market year over year. I don't think that says much about inequality as a whole.
- viraptor 9y ago
  First you have to have money to invest. Then you have to have enough money to make it worth considering the transaction fees. The bottom part has debts, not spare cash for investing, so the stock market is almost completely irrelevant for them.
- RealityNow 9y ago
  If you inherit $1m+, you can live off of that and not work a day in your life (or at least severely increase how much money you save) while the rest of us toil away as wage slaves for 40+ years.
kukx 9y ago
It is difficult for American workers to compete with Chinese or Indian people wages. The good thing is that the global inequality is declining.[0] My guess is that when the incomes in low-wage exporter countries get closer to the developed countries, then we may see a wage increase again. [0] - https://ourworldindata.org/global-economic-inequality https://ourworldindata.org/global-economic-inequality
- logicchains 9y ago
  This has been predicted: https://en.wikipedia.org/wiki/Factor_price_equalization https://en.wikipedia.org/wiki/Factor_price_equalization. Under this model, incomes (especially those of lower-skilled workers) in developing and developed countries will eventually meet somewhere in the middle. Once all countries are equally developed, this downwards pressure on low-skilled wages in developed countries will abate. Restrictions on outsourcing and trade would prevent this to a degree, but doing so would slow down the income increases in developing countries, hence many economists do not support such restrictions, as it's hard to make an economic argument that developed countries' citizens should be privileged over those of developing countries (although a political argument can certainly be made), and more trade is generally seen as increasing the overall size of the pie.
- justicezyx 9y ago
  I am not sure how can you blame inequality to other nations. Why American workers cannot complete with other nationals, while it seems American elites are still winning? The truth is that the elites in any nations are gaining from the poor. The idea is to blame one nation's inequality on another nation is like blaming one poor man's tragedy on another poor man's being more tragic; while ignore the ones who causes the tragedy...
- fnl 9y ago
  Sorry to have to disenchant you, but the underlying paper by Mauro (affiliation: IMF) that the linked article is citing actually only shows that the global Gini index is going up (less income inequality). And, in the same time-span (since the 80's), the Gini index in the US was also rising, slightly. The problem is that the Gini index is built to be robust against outliers (those 1%). So no, both locally (US) and globally, inequality is on the rise - even if the Gini index is going up in both cases.
deleted 9y ago
[deleted]
sctb 9y ago
Previous discussions: https://news.ycombinator.com/item?id=14956698 https://news.ycombinator.com/item?id=14956698 https://news.ycombinator.com/item?id=14959346 https://news.ycombinator.com/item?id=14959346
mxfh 9y ago
Taxation should compensate for the fact that the top 0.1% of people have the means to pay specialists to optimize their financial gains. This advantage has nothing to do with individual skill or hard working ethics. Taxation schemes that don't take this into account are simply unfair.
PhiWhale 9y ago
There is a cool economic / social principal called "Preferential Attachment" that helps describe this a bit. From Wikipedia: "A preferential attachment process is any of a class of Citation dynamics processes in which some quantity, typically some form of wealth or credit, is distributed among a number of individuals or objects according to how much they already have, so that those who are already wealthy receive more than those who are not." It's an interesting principle that plays out in economics as well as other situations where skill is involved. It is similar in some ways to the "80/20 rule" if you are familiar. I would definitely recommend researching the topic a bit. It will definitely add some dynamics to your view of income inequality.
watecmascript 9y ago
Poverty is a problem. But is inequality bad? It doesn't bother me that when billionaires have private jets and I don't. I'm not rich, but I can live comfortably, especially if you look at history. The average american has at least one air conditioned car. I'm sure that would make the pharaoh of ancient egypt jealous. He would call inequality on us.

114 points by o- 9y ago

When inequality grows, empires shrink and eventually disappear: https://www.theguardian.com/business/2012/feb/05/inequality-leads-to-economic-collapse https://www.theguardian.com/business/2012/feb/05/inequality-... And let's not kid ourselves. Those on top intend on staying there by growing the gap.

dsacco 9y ago
I don't really understand how that article by the Guardian supports your thesis that, "when inequality grows, empires shrink and eventually disappear." What do you mean?
- rafiki6 9y ago
  What's not clear...it's even in the title. Inequality leads to economic collapse. Here's the end of the article "An economic model that allows the richest members of society to accumulate a larger and larger share of the cake will eventually self-destruct. It is a lesson that is yet to be learned." Generally any state, nation or empire is heavily dependent on a having a strong and healthy economy to remain stable...

arcanus 9y ago

Real title was, 'Our Broken Economy, in One Simple Chart'. Despite some of the recent coverage, this chart indicates that gains are not going to the top 20%: they are going to top 1%, and particularly <1%. To be clear, this is not many programmers: "In 1980, the top 1% of adult earners in the U.S. made $420,000 a year, on average (before taxes and measured in 2014 dollars) — 27 times as much as the average for the bottom 50% of earners. Today the top 1% of earners make an average of $1.3 million a year — 81 times as much as the average for workers in the bottom half." HBR also found that gains are increasingly going to the top firms: there is a global set of winners and losers. Inequality is growing everywhere, in all fields. https://hbr.org/cover-story/2017/03/corporations-in-the-age-of-inequality https://hbr.org/cover-story/2017/03/corporations-in-the-age-...

frgtpsswrdlame 9y ago
I'm not sure we can just blame this on the tiny minority of mega-rich at the top. The whole inversion of the curve is cause for alarm. The chart is great but it seems like everyone's eye is catching on that crazy portion on the far right. Not only do we have to bring that down, we need to grab the line at 5% and start yanking it up. That's probably going to require policies and taxes that not just the 1% but the 20% as well don't like. EDIT: I'd also like to plug this really great article on regional inequality which is a huge problem but usually goes unmentioned in these sorts of discussions: http://washingtonmonthly.com/magazine/novdec-2015/bloom-and-bust/ http://washingtonmonthly.com/magazine/novdec-2015/bloom-and-...
- cristianpascu 9y ago
  If the inequality is artificial, it might be that an artificial intervention will reverse it. If it's not, than so God help us. A democratically "elected" Robin Hood will probably just take a lot from the rich and give a little to the poor to keep being "elected" democratically. On another side of life, the moment people have enough to pay the bill, anything more will not make them any happier. Leveling the income or the wealth is not doing anything effective to increasing happiness. What's and where's the problem of inequity? The fact that I can't afford a luxurious yacht trip?
  - frgtpsswrdlame 9y ago
    What is "artificial" in your mind?
  - AstralStorm 9y ago
    The actual problem is working long hours when you could be working short hours for the same pay, freeing time for both enjoyment, well being and creativity. Rich can also afford to hire servants and employees to do things for them. They can also afford expensive extra things or medical procedures without getting bankrupted. Capital such as factories, research facilities. Teams to manipulate both common people (marketing) and politicians (lobbyists).
- 9y ago

gallerdude 9y ago

It's an interesting question. Most of peoples incomes are rising, it's just whose incomes are rising more than others. Is that still fair?

1001101 9y ago
No, it's not fair. If you're an anarcho-capitalist, "what is this minimum wage thing?," if you're a communist "seize the means of production!"
- swiftting 9y ago
  If you're an anarcho-capitalist, "what is this minimum wage thing?," I thought eliminating the minimum wage was a common sense libertarian ideal. Google Economist Walter Williams!
peatmoss 9y ago
Economists don't generally buy the buy idea that you can make some people better off without making others worse off. In short, if all the gains happen for one group, even if the other group isn't directly losing money, their purchasing power will be eroded by the rich. And I'll add that this sort of thing keeps stacking up, because as the rich continue to be able to buy up things like land at a higher rate than the poor, the rich are then able to extract even more money from the poor through rents.
- logicchains 9y ago
  >Economists don't generally buy the buy idea that you can make some people better off without making others worse off. Which economists? Economists generally support freer trade, more open borders and the like because they see trade as fundamentally not a zero sum game: if two parties are willing to make an exchange, it must be because the exchange somehow makes them better off than they would be without it. All of developmental economics is built on this: it's why the majority of the world's population enjoy an incredibly greater standard of living than they did 100 years ago. Everyone is better off. Which is not to say there aren't situations where economists recognise trade-offs. For example, https://en.wikipedia.org/wiki/Factor_price_equalization https://en.wikipedia.org/wiki/Factor_price_equalization: a commonly accepted economic theory that proposes that international trade between poorer and richer countries will make unskilled wages in the poorer countries higher and in the richer countries lower.

alex98 9y ago

A great book on income inequality for those interested is Plutocrats by Chrystia Freeland.

tomtemplate 9y ago

"Most Americans would look at these charts and conclude that inequality is out of control. The president, on the other hand, seems to think that inequality isn’t big enough." Would nobody else reading this want some further information to back up this statement? Its a shame it wasn't nearer the beginning of the article as I could have stopped reading earlier.

KZeillmann 9y ago
It's literally in the preceding paragraph. Notes about how the proposed healthcare law was essentially a transfer of wealth from the poor to the rich, how the proposed tax cuts mainly benefit the richest Americans, and plans to cut school funding.
- deleted 9y ago
  [deleted]
- tomtemplate 9y ago
  "how the proposed tax cuts mainly benefit the richest Americans" Did you gather this view from reading the tax reform? https://assets.donaldjtrump.com/trump-tax-reform.pdf https://assets.donaldjtrump.com/trump-tax-reform.pdf
  - mcguire 9y ago
    "If you are single and earn less than $25,000,... you will not owe any income tax." In 2016, if you were single and made $25,000 your tax was $3290. The standard deduction for singles is $6300. Is there a trick here?
  - KZeillmann 9y ago
    End of the estate tax, end of the AMT, moving the top tax bracket from 39.6% to 25%, to start.
deleted 9y ago
[deleted]
deleted 9y ago

PeachPlum 9y ago

If everyone gets 2x as much tomorrow as today, income inequality rises. Ask people if they would support everyone getting 2x their income tomorrow.

kazagistar 9y ago
Did you not understand the chart? Its a chart based on percent growth. ×2 across the board would be a flat line. Instead, the income of the ultra rich is vastly up, while for everyone else it is much smaller, not in terms of absolute numbers, but percentage.
creaghpatr 9y ago
Yes, this is how inflation is leveraged by those at the top to dilute the bottom 98%. People think in terms of dollars instead of purchasing power, the fed need only boil the water slow enough for people to remain compliant.
- wonder_er 9y ago
  Not sure why the downvotes. Purchasing power is all that matters. Would you rather earn $1/hr or $15/hr? All that matters is what that money can purchase. This is the funny thing about our steadily increasing minimum wage laws. I've not seen many people discuss why purchasing power keeps declining. In 1990, $15/hr then was equivalent to $28.72/hr today. [0] Obviously, something is happening to purchasing power of our dollars, but it doesn't get discussed much. [0] https://www.dollartimes.com/inflation/inflation.php?amount=15&year=1990 https://www.dollartimes.com/inflation/inflation.php?amount=1...
deleted 9y ago
[deleted]
Jack000 9y ago
wait, wouldn't scaling income by a constant multiple be the same as not changing anything? Your income and expenses are both doubled. this would just kill the bank accounts of anyone holding cash.

autokad 9y ago

It looks to me that QE3 was a huge part of that later uptick. its no surprise to me that if you juice the markets and inflate asset prices (mostly stock), that the richest benefit most. what was surprising to me is how bad actually making stuff did. I understand that juicing the markets might not benefit that, but it seemed as though QE3 actually hurt producing tangible things.

refurb 9y ago
Exactly. The distributions looks reasonable until ~2008, when things go wonky. That coincides quite nicely with the bottom of the equities market and the subsequent bull run. Also, something seems off. The animated chart is not data for a given year, it's for the last 34 year ending in that year. Since you're averaging growth over 34 years, the only way the top percentile can go from 3% growth (over 34 years) to 5% is if you average in really huge growth. Also, the 34 year measurement makes me suspicious. Seems like an odd time period to capture. Maybe if you made it 30 or 40 years the data isn't quite so compelling?
- joshmaker 9y ago
  From the article: > (The economists used 34-year windows to stay consistent with their original chart, which covered 1980 through 2014.)
- lorenzhs 9y ago
  I think it's more likely that 34 years were chosen because 1980 - 34 = 1946 makes sense for a post-WW2 analysis. The graph doesn't vary wildly for most of the time (most of the change is a fairly smooth motion), so it seems unlikely that 30 or 40 years would change the conclusion. Note that a sharp rise in the curve can also be explained by bad years dropping out of the 34-year window. This would probably explain the increases in the 1%'s weath around 1992 and 2003 (1958 and 1969-70 recessions, respectively). See https://en.wikipedia.org/wiki/List_of_recessions_in_the_United_States https://en.wikipedia.org/wiki/List_of_recessions_in_the_Unit...
- mcguire 9y ago
  Income inequality has been a visible problem for more than 10 years. Income Progress across the American Income Distribution, 2000-2005 (https://www.brookings.edu/testimonies/income-progress-across-the-american-income-distribution-2000-2005/ https://www.brookings.edu/testimonies/income-progress-across...) "Finally, incomes are growing less equal. Over the past quarter century Americans at the top of the income distribution have seen much faster income growth than people in the middle class. If average income grows 1% a year and top earners enjoy gains of 2% a year, many people in the middle and bottom will see their incomes grow much more slowly than 1% a year. Top income earners experienced sharp income declines in the last recession, but in the last couple of years their incomes have rebounded strongly. This reinforces the impression that the gains from prosperity have flowed disproportionately to people at the top rather than in the middle of the distribution." Income Gap Is Widening, Data Shows (https://mobile.nytimes.com/2007/03/29/business/29tax.html https://mobile.nytimes.com/2007/03/29/business/29tax.html) "Income inequality grew significantly in 2005, with the top 1 percent of Americans — those with incomes that year of more than $348,000 — receiving their largest share of national income since 1928, analysis of newly released tax data shows.'

humanrebar 9y ago

It's my understanding that there is some churn in the top 1% of earners. If the economy transitioned to a place where people had big spikes and dips in their annual income, couldn't the graph look the same? Doesn't that sound like a "gig economy"? In other words, why graph income and not wealth?

nsebban 9y ago
> In other words, why graph income and not wealth? I think it's because people's wealth is really hard to estimate. The border between people's assets and their companies', foundations' and what not are usually blurry enough that you would get a graph that shows no insight. Although income is not a great KPI, at least there are reliable methods to figure it out, or at least make estimates with a quite acceptable precision.
- humanrebar 9y ago
  Sure, but there are downsides to this approach as well. Say someone could have a small business that takes off and retires after a few years with a reasonable retirement fund. This doesn't fit the mold of a hoarding 1%-er. It seems like discouraging this kind of income spike would actually decrease social mobility.
  - mcguire 9y ago
    https://www.theatlantic.com/business/archive/2016/07/social-mobility-america/491240/ https://www.theatlantic.com/business/archive/2016/07/social-... "“The probability of ending where you start has gone up, and the probability of moving up from where you start has gone down,” Carr said. For instance, the chance that someone starting in the bottom 10 percent would move above the 40th percentile decreased by 16 percent. The chance that someone starting in the middle of the earnings distribution would reach one of the top two earnings deciles decreased by 20 percent. Yet people who started in the seventh decile are 12 percent more likely to end up in the fifth or sixth decile—a drop in earnings—than they used to be."
    - 9y ago

spo81rty 9y ago

Any investor can make 4-6% annual gains in the stock market year over year. I don't think that says much about inequality as a whole.

viraptor 9y ago
First you have to have money to invest. Then you have to have enough money to make it worth considering the transaction fees. The bottom part has debts, not spare cash for investing, so the stock market is almost completely irrelevant for them.
RealityNow 9y ago
If you inherit $1m+, you can live off of that and not work a day in your life (or at least severely increase how much money you save) while the rest of us toil away as wage slaves for 40+ years.

kukx 9y ago

It is difficult for American workers to compete with Chinese or Indian people wages. The good thing is that the global inequality is declining.[0] My guess is that when the incomes in low-wage exporter countries get closer to the developed countries, then we may see a wage increase again. [0] - https://ourworldindata.org/global-economic-inequality https://ourworldindata.org/global-economic-inequality

logicchains 9y ago
This has been predicted: https://en.wikipedia.org/wiki/Factor_price_equalization https://en.wikipedia.org/wiki/Factor_price_equalization. Under this model, incomes (especially those of lower-skilled workers) in developing and developed countries will eventually meet somewhere in the middle. Once all countries are equally developed, this downwards pressure on low-skilled wages in developed countries will abate. Restrictions on outsourcing and trade would prevent this to a degree, but doing so would slow down the income increases in developing countries, hence many economists do not support such restrictions, as it's hard to make an economic argument that developed countries' citizens should be privileged over those of developing countries (although a political argument can certainly be made), and more trade is generally seen as increasing the overall size of the pie.
justicezyx 9y ago
I am not sure how can you blame inequality to other nations. Why American workers cannot complete with other nationals, while it seems American elites are still winning? The truth is that the elites in any nations are gaining from the poor. The idea is to blame one nation's inequality on another nation is like blaming one poor man's tragedy on another poor man's being more tragic; while ignore the ones who causes the tragedy...
fnl 9y ago
Sorry to have to disenchant you, but the underlying paper by Mauro (affiliation: IMF) that the linked article is citing actually only shows that the global Gini index is going up (less income inequality). And, in the same time-span (since the 80's), the Gini index in the US was also rising, slightly. The problem is that the Gini index is built to be robust against outliers (those 1%). So no, both locally (US) and globally, inequality is on the rise - even if the Gini index is going up in both cases.

deleted 9y ago

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sctb 9y ago

Previous discussions: https://news.ycombinator.com/item?id=14956698 https://news.ycombinator.com/item?id=14956698 https://news.ycombinator.com/item?id=14959346 https://news.ycombinator.com/item?id=14959346

mxfh 9y ago

Taxation should compensate for the fact that the top 0.1% of people have the means to pay specialists to optimize their financial gains. This advantage has nothing to do with individual skill or hard working ethics. Taxation schemes that don't take this into account are simply unfair.

PhiWhale 9y ago

There is a cool economic / social principal called "Preferential Attachment" that helps describe this a bit. From Wikipedia: "A preferential attachment process is any of a class of Citation dynamics processes in which some quantity, typically some form of wealth or credit, is distributed among a number of individuals or objects according to how much they already have, so that those who are already wealthy receive more than those who are not." It's an interesting principle that plays out in economics as well as other situations where skill is involved. It is similar in some ways to the "80/20 rule" if you are familiar. I would definitely recommend researching the topic a bit. It will definitely add some dynamics to your view of income inequality.

watecmascript 9y ago

Poverty is a problem. But is inequality bad? It doesn't bother me that when billionaires have private jets and I don't. I'm not rich, but I can live comfortably, especially if you look at history. The average american has at least one air conditioned car. I'm sure that would make the pharaoh of ancient egypt jealous. He would call inequality on us.