Tuesday, December 13, 2011

A recession is a crappy way to reduce income inequality

Since I harp on income inequality a bit around here, it's important to take note of this New York Times story today:
The share of income received by the top 1 percent — that potent symbol of inequality — dropped to 17 percent in 2009 from 23 percent in 2007, according to federal tax data. Within the group, average income fell to $957,000 in 2009 from $1.4 million in 2007.
If the Top 1 Percent saw its share of income reduced, that means other groups saw their share of income rise. Good news, right? Well, not really. The same recession that kicked the Top 1 Percent in the teeth did the same thing to everybody else. The median household income has actually dropped in recent years, thanks also in large part to the recession.

The problem with growing income inequality isn't merely that the rich are getting richer. That happens. The problem has been that the rich have gotten richer while everybody else has seen stagnating incomes to go along with increased productivity, and often needed to add a second person in the household working just to keep up.

There are some people who will probably be plenty happy to see the rich become less rich, but not me. I want to see working- and middle-class folks be able to get ahead. A recession-fueled flattening of the economic bell curve isn't really cause for celebration. And as the Times notes, it's probably short-lived anyway—history shows the Top 1 Percent will likely start to pull away again. It probably won't be because a rising tide is lifting all boats. The problem still exists.


namefromthepast said...

Was having a conversation recently about wealth/income distribution.

Can liberals and conservatives politely agree that the only time an economy can grow is when "income inequality" is widening?

Admitedly I haven't taken the time for research but as a ratio of income has the inequality widened that much I wonder?

For example if a guy makes 80K and doubles his income to 160K vs a guy doubling a 900K to 1.8M? Is this considered widening the gap?

Also, most folks have chosen a field that doesn't allow ascent into a 1M salary. So is median income a fair measure when comparing the top 1%. I'm inclined to think it isn't.

Allen Klosowski said...

I think you hit the nail on the head. Why be mad somebody else is doing better than you? Why not instead figure out how you can do better for yourself and your family?

A lot of what I hear these days, particularly from OWS, is that the top 1% should be doing worse, but we need to focus on how to make the other 99% do better in terms of income and lifestyle.