American Income Inequality and its Discontents
Brad DeLong excerpts extensively from a Paul Krugman article the NYT is making available only to
economic ignoramuses subscribers noting the fact that, as the old adage goes, the rich keep getting richer.
What we’re seeing isn’t the rise of a fairly broad class of knowledge workers. Instead, we’re seeing the rise of a narrow oligarchy: income and wealth are becoming increasingly concentrated in the hands of a small, privileged elite.
So who are the winners from rising inequality? It’s not the top 20 percent, or even the top 10 percent. The big gains have gone to a much smaller, much richer group than that. A new research paper by Ian Dew-Becker and Robert Gordon of Northwestern University, “Where Did the Productivity Growth Go?,” gives the details. Between 1972 and 2001 the wage and salary income of Americans at the 90th percentile of the income distribution rose only 34 percent, or about 1 percent per year. So being in the top 10 percent of the income distribution, like being a college graduate, wasn’t a ticket to big income gains. But income at the 99th percentile rose 87 percent; income at the 99.9th percentile rose 181 percent; and income at the 99.99th percentile rose 497 percent. No, that’s not a misprint.
Just to give you a sense of who we’re talking about: the nonpartisan Tax Policy Center estimates that this year the 99th percentile will correspond to an income of $402,306, and the 99.9th percentile to an income of $1,672,726. The center doesn’t give a number for the 99.99th percentile, but it’s probably well over $6 million a year.
So, shockingly, only the very rich are very rich. Or, to put it another way, not that many people make $6 million a year. Or, to put a number on it, only 29,821 Americans make that amount.
That’s just wrong.
DeLong believes that “five things are going on:”
1. The rise of a very powerful, successful, exploitative upper class.
2. Further increases in inequality as the tax and transfer system becomes less progressive.
3. Increases in risk that threaten to move middle-class families sharply downward in the wealth distribution.
4. Skill-biased technical change that sharply raises the benefits to education.
5. Holes in the safety net–the fall in the value of the minimum wage, time-limited welfare, and so forth.
Those people in the exploitative upper class are clearly screwing me out of some serious cash. I want another $5.9 million and I want it now. Or, failing that, I want the government’s safety net to fork over $5.9 mil. Frankly, I don’t care so long as the exploitation stops.
Dan Drezner suggests that the reason we aren’t seeing a massive public uprising over this distribution disparity is the fact even the serfs have more assets, leisure time, and purchasing power than ever before and have the (obviously delusional) idea that rich people worked hard and maybe deserve compensation for that.
That may be. But that’s not going to get me that $5.9 mil.
Show me the money.