Yes, we already know the facts — income inequality has been increasing since the 1970’s. But it can be easy to lose sight of just how important this has been. This presentation of the data — by Claudia Goldin and my former thesis advisor Larry Katz, really hits home:
Note: The figure plots the annual percentage growth rate in mean real family income by quintile and for the top 5 percent of families for 1947 to 1973 and 1973 to 2005. Incomes are converted to constant dollars using the Consumer Price Index Research Series (CPI-U-RS). The income concept used is the official U.S. Census Bureau measure of pre-tax, post-transfer money income.
Economic growth since the mid-1970’s just hasn’t delivered much for many families. Read the full Goldin and Katz posting, over at VoxEU, for a deeper understanding of why. (Hint: It’s education.)
In light of this, perhaps there’s no paradox in the fact that happiness hasn’t grown in the U.S. since the 1970’s. Rather than inferring that growing income doesn’t raise happiness, these data remind us that for most of the distribution there hasn’t been much income growth.