New Studies On Increasing Inequality

The Commerce Department released some revised figures on America’s economy last week. Previous numbers, Commerce researchers noted, had overestimated the share of the nation’s income going to workers and underestimated the share going to America’s asset-rich.
“Everything’s coming up roses for people who own a chunk of American capital,” observed Brookings Institution economist Gary Burtless after the new stats emerged. “What we’ve seen in the economic recovery is inequality on steroids. The market is giving wealthy people a very good run.”

That “very good run” has actually been lasting a very long time. Since 1982, the income share of America’s top 1 percent has more than doubled, from 10.8 percent in 1982 to 22.5 percent in 2012.
Americans down below those top 1 percent heights, meanwhile, haven’t been on much of a run at all. They’ve been falling. The wealth of the typical American household has dropped nearly 20 percent since 1984, says a new Russell Sage Foundation study.
As of June 2014, adds a new analysis of private sector wages, average American worker real wages have dipped 16.2 percent since 1972, their record high point.
Fabulously good times for the ultra affluent. Struggling times for most everybody else. This bifurcated reality has essentially become America’s “new normal.”

from here

Can Increasing Inequality Be a Steady State?

Lars Osberg: Dalhousie University, Canada

 

Historically, discussions of income inequality have emphasised cross-sectional comparisons of levels of inequality of income. These comparisons have been used to argue that countries with more inequality are less healthy, less democratic, more crime-infested, less happy, less mobile and less equal in economic opportunity, but such comparisons implicitly presume that current levels of inequality are steady state outcomes. However, the income distribution can only remain stable if the growth rate of income is equal at all percentiles of the distribution. This paper compares long-run levels of real income growth at the very top, and for the bottom 90% and bottom 99% in the United States, Canada and Australia to illustrate the uniqueness of the post-WWII period of balanced growth (and consequent stability in the income distribution). The ‘new normal’ of the United States, Canada and Australia is ‘unbalanced’ growth – specifically, over the last thirty years the incomes of the top 1% have grown significantly more rapidly than those of everyone else. The paper asks if auto-equilibrating market mechanisms will spontaneously equalise income growth rates and stabilise inequality. It concludes that the more likely scenario is continued unbalanced income growth. This, in turn, implies, on the economic side, consumption and savings flows which accumulate to changed stocks of indebtedness, financial fragility, and periodic macroeconomic crises; and, on the social side, to increasing inequality of opportunity and political influence. Greater economic and socio-political instabilities are therefore the most likely consequence of increasing income inequality over time.

 

PDF can be accessed at above link