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The headline is a non-sequitur of the finding, which says that if GDP growth was equal to salary growth, the median salary would be $102,000. That has nothing

The headline is a non-sequitur of the finding, which says that if GDP growth was equal to salary growth, the median salary would be $102,000. That has nothing to do with income inequality. GDP itself is a problematic figure, but its relation to income is rather loose. If everybody earned the mean income, that would be perfect income equality. For the US, mean household income is around $72,000, whereas median household income is around $62,000. https://en.wikipedia.org/wiki/Household_income_in_the_United_States https://en.wikipedia.org/wiki/Household_income_in_the_United...

projektfu 6y ago
It appears to be about prime age, full time workers. This could result in a higher number than mean household income because it excludes retired households, those with significant non work income, unemployed households, etc. https://www.rand.org/content/dam/rand/pubs/working_papers/WRA500/WRA516-1/RAND_WRA516-1.pdf https://www.rand.org/content/dam/rand/pubs/working_papers/WR...
- gridlockd 6y ago
  I don't see anything wrong with the paper, just with the conclusion of the BI article. If you look at table C1b, to keep up with 118% GDP growth, you would have to be in the top 1%, in which case your income growth would've been 138.8%. We can then see that redistribution of those extra 20% among the bottom 99% could not possibly turn a median of $50,000 into a median of $102,000.
  - projektfu 6y ago
    In your calculation using that table you are leaving out the income of the top 1%. The 99%ile represents the income of the top of "the 99%". In table 2.b, in the main article, you get a taste of the size of the 1% income, which is on average twice the 99%ile. In the paper I didn't find figures that I could use to reconstruct how much money would have to end up in someone else's hands to achieve the counterfactual, just that it's obvious that the 1% average going from $1,384,000 to $630,000 would represent a lot on its own. The other groups above the median would also have received less of a share. Also note that it may have happened that between 2007 and 2018 the 90-98%iles may have already received some of the money that used to accrue to the 99%ile, who knows why. I think BI properly quoted the article, but there would be a lot of work to do to contextualize the whole thing. If growth were more shared, would there be more or less growth? That depends on whether the top 1% are actually creating GDP or whether they are just better at capturing the income from it. If there was a system in place that had paid the bottom 98% more, would there have been more inflation, eating away at real GDP growth? What does that big swing from 2007 to 2018 really mean for the 99%ile in C1b, not reflected in C1a? Honestly, this paper raises more questions to me than it answers.
    - gridlockd 6y ago
      > In your calculation using that table you are leaving out the income of the top 1%. The 99%ile represents the income of the top of "the 99%". In table 2.b, in the main article, you get a taste of the size of the 1% income, which is on average twice the 99%ile. I am not leaving anything out, I am using the same table that the BI article used, the one with the $102,000 counterfactual representing "Full-Year, Full-Time, Prime-Aged Workers". The one you mentioned yourself. If I were to instead use Table 2b, the median counterfactual would only be $57,000 and I would be making the same argument with different numbers. > In the paper I didn't find figures that I could use to reconstruct how much money would have to end up in someone else's hands to achieve the counterfactual. All the figures are there. Just take the delta for every percentile and add it all up. If the sum is negative, you can't achieve the counterfactual by income redistribution. (Spoiler: The sum is negative) Why the huge disparity? It's because the GDP and income are only loosely related. The US has collectively been spending more than it earned for decades, and all that spending goes into the GDP. > I think BI properly quoted the article, but there would be a lot of work to do to contextualize the whole thing. They may have "properly quoted" the article, but they came to a wrong conclusion that feeds into the popular "the rich are taking all our money" narrative.
      - projektfu 6y ago
        The 99th percentile leaves out the income of the top 1 percent. And, in any event, none of these graphs are really representing the size of each slice of the pie for a group of people, they're just looking at the income at that level. I guess we'll have to agree to disagree. I don't find the paper very informative, but I find the BI article to be an accurate representation of what the author is trying to say.
        gridlockd 6y ago
        > The 99th percentile leaves out the income of the top 1 percent. Again, you could use table 2a, which specifies the top 1%. You would have to come to the same conclusion, if you do the math. Of course the top 1% did disproportionately grow their income relative to GDP growth, it's just not enough to redistribute to make everyone else fall in line with GDP growth. Not even close. > And, in any event, none of these graphs are really representing the size of each slice of the pie for a group of people, they're just looking at the income at that level. The tables give you all the information you need to infer the slice of the pie. Just add up all the incomes for every percentile and you have the size of the pie, add up the incomes for a percentile group and you have the size of the slice. For table 2a, the size of the pie is $8,529,000. The bottom 25% earn $375,000, or less than 5% of that. The top 1% on the other hand earn 13% of it. I'm not questioning the existence of income inequality. That's not the point. The point is that this income inequality is not the reason for why GDP growth is so detached from income growth. Incomes didn't grow in tandem with GDP for almost every income group. For those income groups that did surpass GDP growth, it didn't surpass by the amount necessary to make up for lack of growth for everyone else. Yet, this is the conclusion that the BI insider wants to draw. The paper doesn't draw this conclusion, probably because it is obviously wrong. > I don't find the paper very informative, but I find the BI article to be an accurate representation of what the author is trying to say. It's a misrepresentation. Do the math!
pnutjam 6y ago
The majority of families are 2 income now, but family income did not double at any point in the last 30 years. Ask yourself why.
- foogazi 6y ago
  More people entering the workforce kept wages down?
  - pnutjam 6y ago
    getting closer...
- gridlockd 6y ago
  I'd rather ask you why and then clear out some misconceptions you may have.
PaulDavisThe1st 6y ago
It has a lot to do with income inequality. GDP is a reflection of overall economic activity. If it grows by 10%, it's entirely reasonable to expect that most people's income grow by some number that has a linear relationship to 10%. That's largely what happened in the 50's and 60's. The conventional measure for this is "percentage of GDP distributed as wages". This number has mostly dropped for the last 35-40 years, whereas its corollary - "percentage of GDP not distributed as wages" has grown. This is the largest single contributor to current income and wealth inequality.
- gridlockd 6y ago
  Wages grow as demand for labor grows and increased economic activity should increase demand for labor. So far so good. However, that's about as far as the relation goes. Technological improvement can both reduce the demand for labor and increase GDP. If there is no reason for demand for labor to increase, wages won't rise. The narrative that a small percentage of people is earning so much and therefore everyone else must earn far less is popular, but mostly wrong. I gave you the source that says perfect income redistribution would cause only a wage increase of less than 20% to the current median. That's the real impact of income inequality, it's not more than 100% like this article would like you to believe.
  - PaulDavisThe1st 6y ago
    >Technological improvement can both reduce the demand for labor and increase GDP. If there is no reason for demand for labor to increase, wages won't rise. That's a political statement, not a law of nature. Bundled up in there are a large number of assumptions about how an economy works, how taxation works, what the purpose of a society (or even just technological advancement) really is. I appreciate that for a lot (most?) people in the USA today, your beliefs about this are the common ones, and they seem self-evident and obviously true. But they are just one choice among many. If you can't appreciate the difference that every single full time worker making $72k/year would make over the current situation (median of $62k/yr, up dramatically from just a couple of years ago when it was $53k), then I don't think I can help you. Moving the mean of a distribution to "less than 20% higher" than the median is huge!

projektfu 6y ago

It appears to be about prime age, full time workers. This could result in a higher number than mean household income because it excludes retired households, those with significant non work income, unemployed households, etc. https://www.rand.org/content/dam/rand/pubs/working_papers/WRA500/WRA516-1/RAND_WRA516-1.pdf https://www.rand.org/content/dam/rand/pubs/working_papers/WR...

gridlockd 6y ago
I don't see anything wrong with the paper, just with the conclusion of the BI article. If you look at table C1b, to keep up with 118% GDP growth, you would have to be in the top 1%, in which case your income growth would've been 138.8%. We can then see that redistribution of those extra 20% among the bottom 99% could not possibly turn a median of $50,000 into a median of $102,000.
- projektfu 6y ago
  In your calculation using that table you are leaving out the income of the top 1%. The 99%ile represents the income of the top of "the 99%". In table 2.b, in the main article, you get a taste of the size of the 1% income, which is on average twice the 99%ile. In the paper I didn't find figures that I could use to reconstruct how much money would have to end up in someone else's hands to achieve the counterfactual, just that it's obvious that the 1% average going from $1,384,000 to $630,000 would represent a lot on its own. The other groups above the median would also have received less of a share. Also note that it may have happened that between 2007 and 2018 the 90-98%iles may have already received some of the money that used to accrue to the 99%ile, who knows why. I think BI properly quoted the article, but there would be a lot of work to do to contextualize the whole thing. If growth were more shared, would there be more or less growth? That depends on whether the top 1% are actually creating GDP or whether they are just better at capturing the income from it. If there was a system in place that had paid the bottom 98% more, would there have been more inflation, eating away at real GDP growth? What does that big swing from 2007 to 2018 really mean for the 99%ile in C1b, not reflected in C1a? Honestly, this paper raises more questions to me than it answers.
  - gridlockd 6y ago
    > In your calculation using that table you are leaving out the income of the top 1%. The 99%ile represents the income of the top of "the 99%". In table 2.b, in the main article, you get a taste of the size of the 1% income, which is on average twice the 99%ile. I am not leaving anything out, I am using the same table that the BI article used, the one with the $102,000 counterfactual representing "Full-Year, Full-Time, Prime-Aged Workers". The one you mentioned yourself. If I were to instead use Table 2b, the median counterfactual would only be $57,000 and I would be making the same argument with different numbers. > In the paper I didn't find figures that I could use to reconstruct how much money would have to end up in someone else's hands to achieve the counterfactual. All the figures are there. Just take the delta for every percentile and add it all up. If the sum is negative, you can't achieve the counterfactual by income redistribution. (Spoiler: The sum is negative) Why the huge disparity? It's because the GDP and income are only loosely related. The US has collectively been spending more than it earned for decades, and all that spending goes into the GDP. > I think BI properly quoted the article, but there would be a lot of work to do to contextualize the whole thing. They may have "properly quoted" the article, but they came to a wrong conclusion that feeds into the popular "the rich are taking all our money" narrative.
    - projektfu 6y ago
      The 99th percentile leaves out the income of the top 1 percent. And, in any event, none of these graphs are really representing the size of each slice of the pie for a group of people, they're just looking at the income at that level. I guess we'll have to agree to disagree. I don't find the paper very informative, but I find the BI article to be an accurate representation of what the author is trying to say.
      - gridlockd 6y ago
        > The 99th percentile leaves out the income of the top 1 percent. Again, you could use table 2a, which specifies the top 1%. You would have to come to the same conclusion, if you do the math. Of course the top 1% did disproportionately grow their income relative to GDP growth, it's just not enough to redistribute to make everyone else fall in line with GDP growth. Not even close. > And, in any event, none of these graphs are really representing the size of each slice of the pie for a group of people, they're just looking at the income at that level. The tables give you all the information you need to infer the slice of the pie. Just add up all the incomes for every percentile and you have the size of the pie, add up the incomes for a percentile group and you have the size of the slice. For table 2a, the size of the pie is $8,529,000. The bottom 25% earn $375,000, or less than 5% of that. The top 1% on the other hand earn 13% of it. I'm not questioning the existence of income inequality. That's not the point. The point is that this income inequality is not the reason for why GDP growth is so detached from income growth. Incomes didn't grow in tandem with GDP for almost every income group. For those income groups that did surpass GDP growth, it didn't surpass by the amount necessary to make up for lack of growth for everyone else. Yet, this is the conclusion that the BI insider wants to draw. The paper doesn't draw this conclusion, probably because it is obviously wrong. > I don't find the paper very informative, but I find the BI article to be an accurate representation of what the author is trying to say. It's a misrepresentation. Do the math!

pnutjam 6y ago

The majority of families are 2 income now, but family income did not double at any point in the last 30 years. Ask yourself why.

foogazi 6y ago
More people entering the workforce kept wages down?
- pnutjam 6y ago
  getting closer...
gridlockd 6y ago
I'd rather ask you why and then clear out some misconceptions you may have.

PaulDavisThe1st 6y ago

It has a lot to do with income inequality. GDP is a reflection of overall economic activity. If it grows by 10%, it's entirely reasonable to expect that most people's income grow by some number that has a linear relationship to 10%. That's largely what happened in the 50's and 60's. The conventional measure for this is "percentage of GDP distributed as wages". This number has mostly dropped for the last 35-40 years, whereas its corollary - "percentage of GDP not distributed as wages" has grown. This is the largest single contributor to current income and wealth inequality.

gridlockd 6y ago
Wages grow as demand for labor grows and increased economic activity should increase demand for labor. So far so good. However, that's about as far as the relation goes. Technological improvement can both reduce the demand for labor and increase GDP. If there is no reason for demand for labor to increase, wages won't rise. The narrative that a small percentage of people is earning so much and therefore everyone else must earn far less is popular, but mostly wrong. I gave you the source that says perfect income redistribution would cause only a wage increase of less than 20% to the current median. That's the real impact of income inequality, it's not more than 100% like this article would like you to believe.
- PaulDavisThe1st 6y ago
  >Technological improvement can both reduce the demand for labor and increase GDP. If there is no reason for demand for labor to increase, wages won't rise. That's a political statement, not a law of nature. Bundled up in there are a large number of assumptions about how an economy works, how taxation works, what the purpose of a society (or even just technological advancement) really is. I appreciate that for a lot (most?) people in the USA today, your beliefs about this are the common ones, and they seem self-evident and obviously true. But they are just one choice among many. If you can't appreciate the difference that every single full time worker making $72k/year would make over the current situation (median of $62k/yr, up dramatically from just a couple of years ago when it was $53k), then I don't think I can help you. Moving the mean of a distribution to "less than 20% higher" than the median is huge!