Look: I am eager to learn stuff I don't know--which requires actively courting and posting smart disagreement.

But as you will understand, I don't like to post things that mischaracterize and are aimed to mislead.

-- Brad Delong

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Monday, November 5, 2018

Income inequality Over Time

Some people think that other people, like Krugman, Piketti, Saez, and - well - me have it all wrong about income inequality. I might take a deep dive into that link at some future date, but for now here are quick graphical looks at reality.

I plotted data from the Census Bureau Historical Household Income Tables to get these graphs.

First, here are the upper income limits for the bottom 4 quintiles, along with the lower limit for the 95th percentile for years from 1967 through 2017.

Graph 1 - Income limits per population slice

Clearly, the spread between quintiles has increased, and by larger amounts as you go up the income ladder.

Looking at it in constant 2017 dollars in Graph 2 makes this picture even more stark.

Graph 2 - Income Groups in Constant 2017 Dollars

The modest nominal gains in the bottom two quintiles have been largely obliterated by inflation. The spread between groups has widened.

What is the mechanism for increased disparity?  The data shows that it is income captured by each group.  This is presented in Graph 3.

Graph 3 - Aggregate share of income

Even into the 4th quintile, the aggregate share of each lower group has declined, while the top quintile has captured more than 100% of the gains, almost every year over the last 50 years.

Graph 4 shows the 1st and 4th quintiles along with the top 5%.

Graph 5 - Including the Top 5%

The top 5% have gained a significantly increasing share of the pie, and now are receiving about as much as the entire 4th quintile.  The pie is growing, but the rich are taking an increasingly larger slice.

I haven't taken a hard look yet at the article I linked at the beginning of this post.  We'll see what kind of arguments are put forth to counter the reality I have presented here.