IS INEQUALITY INCREASING?
February 12, 2007
Have all of the income gains of the past two decades gone only to those at the top, with everyone else stagnating or falling behind?
This notion comes from highly publicized studies by two economists: Thomas Piketty (École Normale Supérieure in Paris) and Emmanuel Saez (University of California, Berkeley). Yet their findings are contradicted by other studies:
- The Congressional Budget Office (CBO) estimates that between 1979 and 2000 the real income of the bottom 80 percent of households rose by 12 percent before taxes and 15 percent after taxes.
- The Census Bureau shows a 24 percent increase in the bottom 80 percent of households between 1978 and 2000 -- most of it since 1982 and growing at an accelerating pace.
- The Federal Reserve Board finds that from 1989 to 2004 the increase in real median income for the top 40 percent was initially identical to the increase for the bottom 40 percent.
Further, the Census Bureau's measure of overall inequality (Gini coefficient) shows no increase in inequality over the past decade.
Source: Alan Reynolds, "Income and Wealth," Greenwood Press, 2006.
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