Is Income Inequality Rising, and Are a Lot of Feathers Heavy?

New data on income inequality in the United States were just released.  And they provide a useful teaching moment. The graph below, which comes from the Census Bureau, shows the evolution of the Gini coefficient since 1967.  It’s pretty clear that this measure of inequality has been rising pretty much through this whole period.

 

But here’s how the Census Bureau chose to describe these data:

Based on the Gini index, income inequality increased by 1.6 percent between 2010 and 2011; this represents the first time the Gini index has shown an annual increase since 1993, the earliest year available for comparable measures of income inequality.

Say what?

It turns out that they’re looking only at year-to-year changes.  And they’re counting a year-to-year change as positive only if it measures inequality this year as being statistically significantly larger than it was last year.  And while inequality rose in most years, it may not have risen by enough over any one year to be called statistically significant. 

Yet while the Census Bureau may be right that no individual year-to-year change was statistically significant, the accumulation of positive changes is.  That is, since 1993, the number of times inequality has risen, is itself statistically significant.  Alternatively, if you compare inequality today with that more than a year or two earlier, the rise both this year and in most years is statistically significant.

Over on Twitter, Alex Tabarrok had a nice way of summarizing the mistaken logic that led the Census Bureau to make such a misleading statement:

               Census: Feathers are light therefore lots of feathers are also light. 

His point: Each year-to-year change in inequality may not be that significant of a burden, but accumulating a bunch of them over decades really is.

Bottom line: Your eyes don’t deceive you, inequality is rising.  And think hard about what statements about statistical significance are really testing.

Leave A Comment

Comments are moderated and generally will be posted if they are on-topic and not abusive.

 

COMMENTS: 51

View All Comments »
  1. Justin S. says:

    The technical name is fallacy of composition

    Well-loved. Like or Dislike: Thumb up 15 Thumb down 0
  2. Justin S. says:

    I’m most curious about the motive for the misinformation.

    Thumb up 4 Thumb down 0
    • Jason says:

      Remember that this is the government and therefore at least 10 people edited that announcement before it went out. Could mean any number of things, but my theory is that somewhere along the line someone added:
      - “The increase was so great this year that it was statistically significant for the first time since 1993.”
      That became:
      “this represents the first time the Gini index has shown a STATISTICALLY SIGNIFICANT annual increase since 1993.”
      And finally a public affairs officer said, “Readers don’t like complex words like statistically significant,” and promptly cut them out.

      Well-loved. Like or Dislike: Thumb up 20 Thumb down 1
  3. Gabe Kotter says:

    This is a bit off-topic about the statistical relevance of the data discussed above.

    I keep hearing about income inequality, but no one can tell me why it is bad. I can see if evil land barons kept all the gold in their tower and didn’t let the peasants have anything but gruel, but in a free, capitalist society, isn’t income inequality the point, or if not the point exactly, at least the result of the system working?

    If we all are pursing our own individual best interests, and assuming that there are laws and rules and that people by and large follow them, isn’t income inequality evidence that those who create value are yielding the benefits of that value? And that those who do not are therefore not?

    My income/wealth has stayed roughly the same year over year but Sergey Brin has gone from his Stanford dorm room (and the Soviet Union) to being worth $18 Billion. Isn’t that how it should work? Or if a guy who sells copy machines sells a bunch of them while his counterpart sells none, shouldn’t there be income inequality between the two? Sergey Brin and sales guy 1 created value, so they should make more money.

    In order to reduce income inequality, we can make Sergey Brin give me some a few million (he won’t miss it), or make sales guy 1 give sales guy 2 some of his well-earned commissions. Alternatively, I could sit down with sales guy 2 and figure out how the two of us can go out and create something of value.

    It’s not bad for me if someone else gets rich, unless somehow it makes me poor. No one is making the case that the poor are poorer than they used to be because Mark Zuckerberg invented Facebook.

    I think the emphasis on this is simply (and sadly) effective politics for ill-informed people.

    Well-loved. Like or Dislike: Thumb up 81 Thumb down 38
    • Paul in VA says:

      Well said Gabe! It would further be interesting to look at all those people who we here about who are “voluntarily” leaving the work force, and so are no longer included in unemployment data. How many of these people have looked at rising Gov’t benefits and decided that the difference that they make by working Versus just staying on the dole is not worth it and so they “drop down”. Is this data skewed both by a few ultra zillionares on one side, and people “dropping down” on the other?

      Hot debate. What do you think? Thumb up 25 Thumb down 27
      • Kazzy says:

        Have YOU looked at what public assistance actually amounts to? Clearly not.

        Well-loved. Like or Dislike: Thumb up 15 Thumb down 10
    • Kyle says:

      The problem with large amounts of income inequality (because you’re right, some income inequality is desirable) is that it tends to be caused by the lower class making less money in addition to the wealthy making more.

      Large amounts of people having a little disposable income is more desirable than only a couple people having large amounts of disposable income because the rich can only spend so much before they start getting little to no additional benefit from it.

      Well-loved. Like or Dislike: Thumb up 31 Thumb down 14
      • James says:

        “…the lower class making less money in addition to the wealthy making more.”

        I think you’re into a fallacy of “class” being a fixed thing. Even if we limit it to just income, doesn’t the fact that a Sergey Brin can immigrate and make billions demonstrate that there is upward mobility? We could repeat that story any number of times – middle class kid from Omaha starts out with a paper route and winds up with billions, kid raised by single mom starts software company and makes billions, redneck store owner from Arkansas parlays one store into a giant chain and leaves his kids billions…

        You can repeat the story on a smaller scale, too, for every “lower class” kid from China, India, or Appalachia who got a degree in science or engineering, and is now pulling down a 6-figure salary.

        If there’s a lesson here, it seems to be that the market value of relatively unskilled labor (that is, anything that can be replaced by a robot or 4th-world sweatshop worker) is diminishing.

        Well-loved. Like or Dislike: Thumb up 27 Thumb down 22
      • aepxc says:

        @James if the “income mobility” is about as rare and as large as a lottery win, then no – it is not true income mobility. True income mobility would be someone born into the top 1% having as much chance of dying in the top 1% as someone born into the bottom 1% and vice versa.

        Income mobility cannot be anecdotal.

        Well-loved. Like or Dislike: Thumb up 32 Thumb down 13
      • James says:

        “True income mobility would be someone born into the top 1% having as much chance of dying in the top 1% as someone born into the bottom 1% and vice versa.”

        The flip side of this: what percentage of those in the top 1% today were born into the top 1%? I don’t know, but if you take the top 0.0001% or whatever that compose the Forbes 400, you see that darned few, if any, were born on the list. (Not even the Waltons – they’re mostly in their 50s and 60s, and were born when Sam Walton was just another struggling store owner.) Quite a few weren’t even born anywhere near the 1%.

        Even in lower income levels, mobility is far, far more common than lottery wins: perhaps not from the bottom 1% to the top 1%, but certainly from the bottom quintile to the 4th or 5th. We can even identify and track the behaviors that are responsible for that mobility, or the lack of mobility.

        The plural of anecdote is data. Obviously at the very top, there are only a few cases, so anecdotes are both possible and desirable. Below that, if it is commonplace (and it is) for those kids from India & Appalachia to move from the bottom to middle & upper incomes, then that is data.

        Well-loved. Like or Dislike: Thumb up 25 Thumb down 8
      • aepxc says:

        @James, I’m afraid I’d have to disagree. The percentage of super-rich people that were not born super-rich measures nothing. If anyone that is born rich is highly likely to die rich, it means that once you ‘make it’ (or have your parents make it), it takes a lot of effort to lose it. If anyone that is born poor is highly, highly unlikely to die rich, it means that becoming rich functions like a lottery. The proportion of rich people who were not born rich, if the following too conditions are true, simply indicates just how large (or small) the group of rich people is relative to the general population. Consequently, it would imply huge wealth imbalances (where one person’s worth could be tens of millions of times that of another), and significant wealth concentration. Which is exactly what we do see.

        Think of it this way – the fact that Colbert and Napoleon could rise to the top of the French ruling class from relatively modest backgrounds does nothing to support the view that absolute monarchy is a fair or efficient political system. The same is true for Gates, Zuckerberg, or the Waltons. This is not income mobility. Income mobility would have most income for most people (both individually and as aggregate national income) determined by factors directly under their control. Likewise, if the income/wealth distribution becomes sufficiently skewed, mobility at the bottom becomes mostly irrelevant. The ability of a scullery maid to move up to a house maid or even (shock! gasp!) a housekeeper is no ringing endorsement of aristocracy. Moving from $20,000 p.a. to $40,000 p.a. does not change so much in a system designed specifically to allow a small handful of people to earn a few billion annually.

        As to data, see here:
        http://www.treasury.gov/resource-center/tax-policy/Documents/incomemobilitystudy03-08revise.pdf

        Hot debate. What do you think? Thumb up 14 Thumb down 17
      • Darkflame says:

        “Large amounts of people having a little disposable income is more desirable than only a couple people having large amounts of disposable income because the rich can only spend so much before they start getting little to no additional benefit from it.”

        Very well said, the people that money will make the most difference too are (almost by definition) then ones that will spend proportionately the most.

        Better to have 10 people with $10000 more a year then 1 person with $100000 more a year.

        Well-loved. Like or Dislike: Thumb up 10 Thumb down 3
    • Michael Peters says:

      You’re right that income inequality is kind of the point in an capitalist economy. The problem isn’t that it exists but that it is growing. Rising income inequality means more people are staying at the top and less people are rising up from the middle and bottom. It actually means there are less Sergey Brin’s and more Paris Hilton’s. Upward mobility is what keeps the gears of hope running in our economy and if people don’t think they will get ahead they will take less risks and create less value.

      Well-loved. Like or Dislike: Thumb up 32 Thumb down 9
      • Don says:

        Prove it. I haev not seen any studies that indicate more people are staying at the top and less people are rising from the middle. In fact, most studies and all census data just takes a point in time in measure the top 1%, 10%, 25% etc. It never looks at those people to compare them to where they were last census.

        Great example is proffesional sports. There is much more inequaly now because Arod makes $26M, while the minimum is “only” about $600k. But that rookie making the min can get Arod salary later on…

        Hot debate. What do you think? Thumb up 18 Thumb down 21
      • Seminymous Coward says:
        Well-loved. Like or Dislike: Thumb up 15 Thumb down 2
      • Mike Hunter says:

        Seminymous Coward beat me to it. More income inequality means less social mobility. The data is there.

        Well-loved. Like or Dislike: Thumb up 13 Thumb down 3
      • James says:

        “Rising income inequality means more people are staying at the top and less people are rising up from the middle and bottom.”

        Does it? Or does it mean that the top keeps rising, while the bottom is pretty well fixed? 25 years ago, Sam Walton was the richest American with a mere $8.5 billion. The total wealth of the Forbes 400 that year was $220 billion. Today the top seven on the list total more than that. Even figuring that inflation has cut the value of the dollar in half since then, the top 20 today have more than all 400 did 25 years ago.

        Well-loved. Like or Dislike: Thumb up 13 Thumb down 5
    • Seminymous Coward says:

      “It’s not bad for me if someone else gets rich, unless somehow it makes me poor. No one is making the case that the poor are poorer than they used to be because Mark Zuckerberg invented Facebook.”

      It does sometimes make you poor. I, for one, would make the case that the poor and even more so the middle class are poorer than they used to be because banks, investment firms, and insurance companies made such staggeringly bad gambles that they needed bailouts. At bare minimum, others are poorer than they could have been had the bailouts (or interest on them in the case of bailouts-by-loan) been used better.

      Hot debate. What do you think? Thumb up 16 Thumb down 15
      • Chill says:

        Agreed… One factor of the free market is consumers as a commodity. If a large enough percentage of people lack purchasing power, the economy cannot continue to grow. The housing crisis is a great example of inflated purchasing power that led to a detrimental impact for all sectors. However, it was the poor and the middle class that felt its impact the most.

        Let’s face it… America’s greatest commodity is our capacity to consume.

        Well-loved. Like or Dislike: Thumb up 7 Thumb down 2
    • Ryan says:

      “Isn’t that how it should work?”

      Is it? People like Brin make obscene amounts of money for producing things that are of moderate benefit to society. But really, Brin is not the problem. What about corporate executives and finance people that make millions of dollars while actually harming society?

      If you believe society has no purpose and it’s every man for himself, than there’s no moral justification for getting angry at increasing wealth disparity. If you think the goal of society is the betterment of all people, than there is.

      You can also look at who is getting wealthy off their work, and what that work entails. You seem to be saying that people who make more money are obviously creating more value. If by value you mean the amount someone is willing to pay you, than you are tautologically correct. If you mean value to society than this is obviously false. Most of the major technological advancements that fundamentally changed peoples’ lives were made by researchers who received little compensation for their work. Is that how it should work?

      Well-loved. Like or Dislike: Thumb up 27 Thumb down 12
      • Trent says:

        “People like Brin make obscene amounts of money for producing things that are of moderate benefit to society”

        I strongly disagree that Google and its hundreds (and counting) of innovations are of moderate benefit to society. In fact, many of Google’s tools (docs, Scholar, Books, etc.) provide free resources that would otherwise be prohibitively expensive for lower income individuals. However, it does not matter how valuable I think their products are. The only thing that matters (in this context) is how valuable their customers think their products are.

        “What about corporate executives and finance people that make millions of dollars while actually harming society”

        Are there specific individuals you are referring to? I’m not saying that these people don’t exist (they clearly do), but they are the exception, not the rule, and should be treated as individuals rather than representative examples of “corporate executives” or “finance people.”

        Well-loved. Like or Dislike: Thumb up 20 Thumb down 5
      • J1 says:

        I think we’re arguing about some pretty extreme outliers when we keep discussing Sergei Brin or the Waltons, but both (well, Sam Walton; not necessarily the kids) created things of great value to society. As for corporate execs and finance people, there cetainly are some who damage society (I’d be interested to compare your list with mine), but the vast majority are extremely beneficial. I work for a corporation run by a corporate exec, and it couldn’t exist without financing. You probably do too. If you work in the public sector, your job couldn’t exist without the taxes paid by those corporations or their employees.

        “Most of the major technological advancements that fundamentally changed peoples’ lives were made by researchers who received little compensation for their work. Is that how it should work?”

        I’d like to see some research to back that statement up (among other things you’ll need to define “little compensation”), but for the sake of argument let’s assume it’s correct. If that work wasn’t possible without my investment, yes, that’s how it should work.

        Thumb up 4 Thumb down 4
      • Ryan says:

        “I strongly disagree that Google and its hundreds (and counting) of innovations are of moderate benefit to society”

        Sure, in an absolute sense. But we’re not talking about Google, we’re talking about Brin. The question is not “How much value does Brin’s company provide” but rather “How much value does Brin personally provide in relation to the 80 billion dollars his work earned him”?

        First of all, Google has many employees. Brin is a single individual. So equating him to Google is nonsense.

        Second, you have no way of knowing which of Google’s innovations would have been reproduced independently without the existence of Google (I would guess many).

        Third, do you really think Brin’s contributions are large relative to his pay? The computer I’m currently posting from runs a FREE operating system designed by unpaid volunteers.

        If you think its reasonable/fair/just whatever that artists and scientists that contribute significantly to society routinely die penniless and Brin makes 18 Billion dollars for making half of a slightly better search engine than previously existed, than our world views are so completely different that this conversation is guaranteed to go no where.

        “The only thing that matters (in this context) is how valuable their customers think their products are”

        But the whole point of the conversation is to evaluate the system itself! You can’t use the system to justify its own existence. We’re talking about the merits of a system that is leading to increasing income and wealth disparity. Your argument is essentially “The system isn’t bad because wealth disparity isn’t bad. Wealth disparity isn’t bad because it’s the result of the action of the system”. THIS IS A CIRCULAR ARGUMENT.

        Thumb up 5 Thumb down 2
    • aepxc says:

      Income inequality is only bad to the extent that it contributes to wealth inequality. Wealth inequality is bad because it undermines equality of opportunity – wealth multiplies the effects of one’s talents and efforts and makes it easier to acquire more wealth. If economics were a sport, wealth inequality would mean that the winners of past races would get some accumulating points, or seconds of head start or whatever for the following races, so the more they won the more they would be assured to win. That would not make for good competition. Power lets one change the rules in one’s favour (to a greater degree that others can). This is as true of economic power as it is of political power.

      There are also negative externalities to centralisation. The more centralised power is (and wealth is economic power) the greater the reach that one bad call has, the greater the incentive for a conservative approach to risk and preference for preservation of the status quo (bad for innovation), and the greater the likelihood that a bad call will be made (there is a limit to how much complexity a person can deal with). Finally, riches and poverty ARE to some extent a relative measure – they capture how much one can do relative to what others can do. We (in the Western world) are all much wealthier than our ancestors were 2000 years ago. If trends continue, we are all much poorer than our descendants will be in 2000 years. This does not prevent us from being able to discuss riches and poverty as we presently face them. In the extreme case, if one person becomes so rich as to buy the whole planet’s land, everyone else WILL be poorer for it (from a utilitarian perspective). Indeed, it is this of wealth and poverty that made Jesus proverbially value the widow’s mites more than the extravagant donations by the rich.

      Ultimately, the proof is in the empirical pudding – no society has had fast economic or leading-edge innovation after a few decades of high inequality (though inequality itself might have ARISEN as a consequence of fast economic growth and innovation). At a certain level of inequality, further skewing the tail of the distribution becomes a lot more rational than trying to shift the average (what would a billionaire care if the median income shifts by $10,000?). And with power unavoidably corrupting, entrenched elites tend to become rent-seeking and extractive.

      So – INCOME inequality is fine, but only if most of it gets quickly consumed (rather than turned into significant imbalances in private wealth). If private wealth begins to become highly centralised, on the other hand, this starts to undermine both ethical fairness and economic efficiency.

      Well-loved. Like or Dislike: Thumb up 42 Thumb down 4
    • Patrick says:

      I would argue that income inequality at a moment in time isn’t bad. The problem in the U.S. is that the median household income has been in decline for the past decade. In the absence of a strong, prospering middle class, less wealth will likely be created in future years (the U.S. economy is largely driven by consumption). Furthermore, to the extend that the shift in wealth away from the lower & middle class to the top 1% continues…. unfortunately the likely outcome will be a more liberal society. I would further argue that a more liberal society has less incentive to take risks on new business ventures. Additionally, increased regulation and a reduction in capital formation will also make the frequency of innovation lower over time.

      The long-term impact (20-30) years will be an economy that is more reliant on the govenment and one with less innovation. I would subscribe to the view that that top 1% pay a special tax that would be used to make equity or debt investments in new businesses or R&D. I recognize that there would be challenges with the allocation of that capital.

      Thumb up 4 Thumb down 5
      • Tab Cocovillea says:

        Lest we forget, the dollar has been hugely affected by Federal Reserve policies. The more they print, the more severe the value of each dollar drop.

        Thumb up 3 Thumb down 1
    • Nil says:

      As long as productivity and resources grow faster than income inequality it is true that a rising tide is rising all boats, however if income inequality grows at a rate that outpaces resource production then the people at the bottom are indeed poorer than they used to be because their share of the overall income pie buys comparative fewer resources than it used to.

      Some resources like land are difficult to increase, so the more Google or Facebook employees get rich the more housing costs in Silicon Valley rise for all who live there. So those at the bottom of the labor force spend much more for the same housing and have less to spend on other goods, or have to choose longer commute to obtain affordable housing and have less time and a lower quality of life. Or if Sergey Brin or Mark Zuckerbeg want dedicated personal physicians, and their employees sign up for concierge medical practices then their are fewer physicians servicing middle class or low income patients. So if income equality outstrips new physician training then the poor will indeed suffer not because they make any less money but merely because others got far richer relative to them.

      Thumb up 2 Thumb down 3
    • nobody.really says:

      You may or may not regard it as a problem that income inequality has been rising. But I regard it as a problem that people don’t RECOGNIZE that income inequality has been rising.

      For example, you will hear many politicians (and others) talking about how the US needs to cut back on [name a program] because we simply can’t afford it anymore. Anymore? US Gross Domestic Product now exceeds $15 trillion. That’s higher than any nation’s GDP in history. Let me say that again: THE US HAS NEVER HAD MORE INCOME THAN IT HAS TODAY. We are not poor; in aggregate, we are richer than any people in history.

      So why do we feel poor? Two words: income inequality.

      True, the US national debt and deficit are high and growing. But that’s a function of many variables – most prominently, the Bush tax cuts that mostly favored the wealthy. Thus — just at the time that affluent people have become more affluent than ever, and just at the time that we’re running unprecedented levels of deficits and debt – we’re taxing affluent people at nearly the lowest rate in the past 75 years. (Top tax rates dipped slightly lower briefly around 1990.)

      For better and worse, US citizens exhibit the least class consciousness of any people in the world. Americans are reluctant to acknowledge that they are either poor or rich; rather, people who live in vastly different circumstances all regard themselves as “middle class.”

      And many identify with the rich. 70% of each graduating class predicts that they will become members of the top 10%. TV shows such as “Friends” depict semi-employed baristas living in spacious penthouse apartments in New York. Poor and working-class people receive a disproportionately small share of air time.

      In short, Americans are not naturally primed to focus on issues such as income inequality – again, for better and worse. But when it comes time to design public policy – when, as now, we’re deciding how much of the Dept. of Agriculture’s budget should go to provide crop supports for millionaires and how much should go to food stamps — people should be knowledgeable about the real resources that our nation has, and the real circumstances of the people who wield those resources.

      Income inequality may be bad or not. Ignorance, however, is unambiguously bad.

      Well-loved. Like or Dislike: Thumb up 16 Thumb down 7
    • Enter your name... says:

      High inequality tends to harm social order. Ten middling families, no matter how low the actual income, tends to rub along well together. Eight impoverished families tend to feel alienated against two rich families.

      It’s not very different from what you’d expect if you took a handful of kids and gave each one piece of candy, and then gave one or two a whole bag of candy. People are unhappy in this circumstance, even if all their objective needs are being met. The ideal situation gives us just enough inequality to reward desirable behaviors (wealth creation) while still maintaining the fellow-feeling of the even-Steven fairness that the little kids want.

      Thumb up 5 Thumb down 3
    • Greg says:

      After reading through the replies to your comment, I feel no one hit on the underlying problem with the income inequality that we have now. You are right to say that in a capitalist system, income inequality is a desirable outcome. The problem is when certain rules favor the rich, and the rich are the ones influencing and writing these rules – there is tremendous conflict of interest.

      Why does investing in stock enjoy such a large government subsidy, with long-term capital gains being taxed at 15% instead of aligned with the income tax rate? Warren Buffet himself has said it wouldn’t effect his investment decisions (at least at a macro level) if the rate were raised. The argument that we need to incentivize savings and investment is a bit facetious – are we really saying that the rich would not invest in the stock market if the tax rates were raised? It seems like the stock market was doing just fine before we lowered the rates.

      The example of Mitt Romney, while an extreme, shows how the capitalist system can go wrong. I do not begrudge him making the money he made fairly with Bain (though making much of it via outsourcing American jobs does not look good on his presidential resume), but the fact that he was able to keep an extra 15-20% of it because of the carried interest exception made for money managers is not FAIR (which I could underline as all caps is a bit louder than I’d like). The fact that Romney lobbied for this and occupied an influential government position to aid with his lobby effort is unethical and the possibility of Romney winning the election and seeking further unfair policies is downright scary.

      While I am not a 1%-er, I am close. Like Romney, I too try to keep as much of my hard-earned money as I can, and pay the taxes I legally owe (but I do not have money stashed in the Caymans). I just disagree with the assumption that we need to subsidize the rich with capital gains incentives that have only seemed to widen the income inequality gap. In general, wages are hard-earned and capital gains passively accumulate (and can sometimes be likened to gambling – though without the house edge). In many ways it seems a bit backward to tax more heavily wages that are hard-earned versus investment that may involve a little research and a few mouse clicks. I believe that much of the income inequality is caused by the gap in tax rates of income vs. capital gains. I know I saw an article showing the discrepancy widening since the capital gains rate went to 15%, but I can’t find it now…

      I would like to believe that, as Americans, most of us are happy that someone is able to become rich – after all, that is our American Dream. The change that has happened recently is that the the rich have been able to to succeed largely without consequences (TARP, etc.) – this is UNFAIR. The fact that many kept their jobs and received bonuses is UNFAIR. The fact that many have gone on and continued to behave in the same fashion and reap gains as a result is UNFAIR. Of course, the rest of us have felt the consequences – the greed of the ultra-rich has made on the rest of the country, not to mention the world, experience a debilitating recession and general socio-political instability.

      Well-loved. Like or Dislike: Thumb up 6 Thumb down 1
  4. TexCIS says:

    Hidden due to low comment rating. Click here to see.

    Disliked! Like or Dislike: Thumb up 20 Thumb down 28
    • Jeff says:

      Because the only two options are the system we have now or communism.

      Well-loved. Like or Dislike: Thumb up 28 Thumb down 6
    • Michael Peters says:

      It’s not that it exists (which isn’t a problem) it’s that it’s rising. If the gap gets too large there is less upward mobility, and that is a problem.

      Thumb up 8 Thumb down 5
      • Mike says:

        You have less upward mobility only if you care more about class than you do income.

        Does it matter if I can’t get into the upper class if I can still join the upper middle class? Or enjoy all of the material benefits of being upper middle class even though I’m “only” at the median salary?

        If we all lived in a village full of mud huts, it would be much easier to become the “richest” guy in the village… but you wouldn’t have close to the potential for upward mobility.

        Thumb up 1 Thumb down 0
  5. dan donoghue says:

    Hidden due to low comment rating. Click here to see.

    Disliked! Like or Dislike: Thumb up 10 Thumb down 22
  6. Nick says:

    What statistical test were they using to determine significance? Because if it’s just comparing year-to-year, then they’re assuming independence of years, which is clearly not a valid approach for time series data.

    Well-loved. Like or Dislike: Thumb up 11 Thumb down 0
  7. frankenduf says:

    Hidden due to low comment rating. Click here to see.

    Disliked! Like or Dislike: Thumb up 2 Thumb down 8
  8. Eric M. Jones says:

    The Gini Coefficient is not the preferred measure of these things, although they point to the same conclusion. Arthur B. Kennickell’ s FRB paper “Ponds and Streams 2007″ was the clearest description of this concern to date. The update after 2009 was never done. My guess is that there were political reasons, or just lack-of-cooperation. I begged ABK to do it but his reply was negative and perfunctory. There is still hope. Common Arthur!

    I mailed or emailed the following to everyone who I thought could benefit from it:

    http://www.periheliondesign.com/downloads/Wealth%20Distribution%202007%20update.pdf

    Failing this, try ABK’s Lorenz curves for family income and net worth contained in the aforementioned paper. Recent information points to a slight drop in top 1% income and a horrendous decline in wealth and income for the bottom 50%

    Thumb up 0 Thumb down 0