Income Inequality Is Still Growing, the Same as Always

Over at National Review, Michael Strain chides Democrats for continuing to be obsessed with growing income inequality:

Income inequality has been growing at a much slower pace over the past ten years. Has anyone noticed? Beyond stabilizing, according to some measures, inequality has actually fallen since the beginning of the Great Recession.

Hmmm. The single best source for a quick but rigorous look at income inequality is the Congressional Budget Office. Their latest report on income distribution goes through 2014 and it looks like this:

Technically, Strain is right. Compared to the beginning of the Great Recession, income inequality is down. But come on. It’s true that rich people took a big hit in capital gains income when the housing bubble imploded, but they’ve taken hits like that before and they’ve always bounced back. The same thing has happened this time. After a big loss, the rich began bouncing back almost immediately. Since 2010, their incomes have gone up by nearly half while the incomes of everyone else have declined. There’s no special reason to think this hasn’t continued since then. Most likely, income inequality in 2018 is higher than it was even at the height of the housing bubble.

There are ways to make this picture look better. If you include income from social welfare programs, incomes of the non-rich have been flat since the Great Recession, not down. Is that solace? Maybe a little, but not much.

Basically, the trendline showing the incomes of the affluent is an inexorable upward line since 1980 with a couple of spikes during the dotcom and housing bubbles. It just keeps rising and rising, and it’s still rising today. That said, I partly agree with Strain’s conclusion:

Part of the reason inequality features so prominently in the national conversation may have less to do with the rich and more to do with the lack of employment opportunities (until very recently, at least) and income growth experienced by many Americans….[Since 2007] median income grew by just 0.2 percent per year. It’s understandable to conclude, correctly or not, that others are doing better than you if your income is growing that slowly.

Whether the size of the gap matters more than the absolute economic condition of non-rich Americans is critical. Each implies different policy responses that are often in conflict.
If the gap matters, then policies that shrink it are good. For example, raising the minimum wage to $15 per hour and significantly strengthening labor unions may be good, because they will raise the earnings of many incumbent workers. But if we care about the economic condition of lower-income Americans, then these policies are counterproductive because they will reduce their employment opportunities. In the conflict between promoting income equality and increasing employment opportunities for lower-income Americans, I side with employment.

I agree that income growth for middle-class workers is ultimately more important than than raw income inequality. However, I very much doubt that labor unions and higher minimum wages are, on net, bad for the middle class. The disemployment effects of these policies appear to be pretty low, which the income-enhancing effects appear to be pretty large. I’m happy to consider other policies too, such as job subsidies, but the perfect should never be the enemy of the good. Nearly every policy worth its weight in white papers has some drawbacks. In the end I vote for all of the above: higher top marginal taxes, increases in the minimum wage, more union power, job subsidies, and anything else we can think of.

WE'LL BE BLUNT

It is astonishingly hard keeping a newsroom afloat these days, and we need to raise $253,000 in online donations quickly, by October 7.

The short of it: Last year, we had to cut $1 million from our budget so we could have any chance of breaking even by the time our fiscal year ended in June. And despite a huge rally from so many of you leading up to the deadline, we still came up a bit short on the whole. We can’t let that happen again. We have no wiggle room to begin with, and now we have a hole to dig out of.

Readers also told us to just give it to you straight when we need to ask for your support, and seeing how matter-of-factly explaining our inner workings, our challenges and finances, can bring more of you in has been a real silver lining. So our online membership lead, Brian, lays it all out for you in his personal, insider account (that literally puts his skin in the game!) of how urgent things are right now.

The upshot: Being able to rally $253,000 in donations over these next few weeks is vitally important simply because it is the number that keeps us right on track, helping make sure we don't end up with a bigger gap than can be filled again, helping us avoid any significant (and knowable) cash-flow crunches for now. We used to be more nonchalant about coming up short this time of year, thinking we can make it by the time June rolls around. Not anymore.

Because the in-depth journalism on underreported beats and unique perspectives on the daily news you turn to Mother Jones for is only possible because readers fund us. Corporations and powerful people with deep pockets will never sustain the type of journalism we exist to do. The only investors who won’t let independent, investigative journalism down are the people who actually care about its future—you.

And we need readers to show up for us big time—again.

Getting just 10 percent of the people who care enough about our work to be reading this blurb to part with a few bucks would be utterly transformative for us, and that's very much what we need to keep charging hard in this financially uncertain, high-stakes year.

If you can right now, please support the journalism you get from Mother Jones with a donation at whatever amount works for you. And please do it now, before you move on to whatever you're about to do next and think maybe you'll get to it later, because every gift matters and we really need to see a strong response if we're going to raise the $253,000 we need in less than three weeks.

payment methods

WE'LL BE BLUNT

It is astonishingly hard keeping a newsroom afloat these days, and we need to raise $253,000 in online donations quickly, by October 7.

The short of it: Last year, we had to cut $1 million from our budget so we could have any chance of breaking even by the time our fiscal year ended in June. And despite a huge rally from so many of you leading up to the deadline, we still came up a bit short on the whole. We can’t let that happen again. We have no wiggle room to begin with, and now we have a hole to dig out of.

Readers also told us to just give it to you straight when we need to ask for your support, and seeing how matter-of-factly explaining our inner workings, our challenges and finances, can bring more of you in has been a real silver lining. So our online membership lead, Brian, lays it all out for you in his personal, insider account (that literally puts his skin in the game!) of how urgent things are right now.

The upshot: Being able to rally $253,000 in donations over these next few weeks is vitally important simply because it is the number that keeps us right on track, helping make sure we don't end up with a bigger gap than can be filled again, helping us avoid any significant (and knowable) cash-flow crunches for now. We used to be more nonchalant about coming up short this time of year, thinking we can make it by the time June rolls around. Not anymore.

Because the in-depth journalism on underreported beats and unique perspectives on the daily news you turn to Mother Jones for is only possible because readers fund us. Corporations and powerful people with deep pockets will never sustain the type of journalism we exist to do. The only investors who won’t let independent, investigative journalism down are the people who actually care about its future—you.

And we need readers to show up for us big time—again.

Getting just 10 percent of the people who care enough about our work to be reading this blurb to part with a few bucks would be utterly transformative for us, and that's very much what we need to keep charging hard in this financially uncertain, high-stakes year.

If you can right now, please support the journalism you get from Mother Jones with a donation at whatever amount works for you. And please do it now, before you move on to whatever you're about to do next and think maybe you'll get to it later, because every gift matters and we really need to see a strong response if we're going to raise the $253,000 we need in less than three weeks.

payment methods

We Recommend

Latest

Sign up for our free newsletter

Subscribe to the Mother Jones Daily to have our top stories delivered directly to your inbox.

Get our award-winning magazine

Save big on a full year of investigations, ideas, and insights.

Subscribe

Support our journalism

Help Mother Jones' reporters dig deep with a tax-deductible donation.

Donate