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Income, Wealth and Poverty |
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For one reason or another, the reasonably steady progress against poverty made following the Great Depression of the 1930's came to an end in 1969. Thirty-six years later, no progress has been made in spite of the country growing much richer.
The Clinton era showed progress, not because of the steady decline, but because the Clinton boom ended with the percent in poverty lower than at the end of the Reagan boom, and the Bush II recession with the percent in poverty lower than at the end of the Bush I recession. The only discouraging point now is that while the economy recovered in 2004, poverty grew worse.
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Freedom to Be More Equal than Others: Graduates Versus Oligarchs
2/27/06 Paul Krugman, NYT,
Ben Bernanke's maiden Congressional testimony as chairman of the Federal Reserve was, everyone agrees, superb. He didn't put a foot wrong on monetary or fiscal policy. But Mr. Bernanke did stumble at one point. Responding to a question from Representative Barney Frank about income inequality, he declared that "the most important factor" in rising inequality "is the rising skill premium, the increased return to education."
That's a fundamental misreading of what's happening to American society. 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.
I think of Mr. Bernanke's position, which one hears all the time, as the 80-20 fallacy. It's the notion that the winners in our increasingly unequal society are a fairly large group — that the 20 percent or so of American workers who have the skills to take advantage of new technology and globalization are pulling away from the 80 percent who don't have these skills.
The truth is quite different. Highly educated workers have done better than those with less education, but a college degree has hardly been a ticket to big income gains. The 2006 Economic Report of the President tells us that the real earnings of college graduates actually fell more than 5 percent between 2000 and 2004. Over the longer stretch from 1975 to 2004 the average earnings of college graduates rose, but by less than 1 percent per year.
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.
Why would someone as smart and well informed as Mr. Bernanke get the nature of growing inequality wrong? Because the fallacy he fell into tends to dominate polite discussion about income trends, not because it's true, but because it's comforting.
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http://zfacts.com/p/335.html | 01/18/12 07:18 GMT
Modified: Fri, 23 Feb 2007 05:38:44 GMT
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Amazon
The Assassins' Gate
Sympathetic to the Iraqi people, it covers both their experience and the ideological debate within the administration. Reveals the monumental impact of neoconservatism on today's foreign policy. "This is a war of ideas, and sometimes even well-intended ideas can be dangerous, and worse, devastating to human life and society."
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