Monday, September 21, 2009

Income for the Masses Not Keeping Up... For 40 Years

A few weeks ago I detailed the divergence in household incomes showing the top 5% of earrners gained mightily over the past 40 years relative to lower level incomes. But in comparing all those income brackets to the growth of the broader economy (on a per capita basis), even those top 5% earners' didn't keep up with the pace.

So over the past 40 years, the only individuals that have seen their incomes increase at / or greater than the level of GDP were those earning more than those in the top 5% (think top 1%).

Source: Census


  1. Thanks for this, I think. Scary - would that it'd taught us to NOT squander our opportunities but c'est la guerre. Speaking of which can you spell stratified society with priveleged groups fighting more and more to protect their rents instead of seeking to gain wealth by creating value? Consider the implications of this pic and whether we have any shot at reversal/recovery:
    The words are here:

  2. Jake,

    In the United States people can and do move among the quintiles over the course of their lives. Thus it is simply not true that "the only individuals that have seen their incomes increase at / or greater than the level of GDP were those earning more than those in the top 5%".

    The United States still has problems with inequalities and unfairness. But this does not mean the people in the bottom quintile are condemned to a permanent hopeless life of serfdom.

  3. i completely agree and that is not what i meant to portay.

    what this chart is showing is that while a person may have increased their income at a faster pace relative to the economy (i.e. moved from the bottom quitile to the middle quintile), the broader levels have all seen their incomes grow at a slower pace.

    the only group that has increased their wealth on an overall basis (ignoring this movement), are those in the top 5% ignorning the movement you detail.

    taking the ability for those to move from these quintiles to the top 5% means that someone else "lost" (i.e. at a national income level this is a zero sum game as the overall incomes can each grow, but the can't all grow faster than national income).

  4. These graphs hide something very important, the growth of the top 1% and is this group who have experienced unprecedented increases in personal wealth.

  5. That time frame happens to coincide with America's loss of manufacturing power and when we became increasingly dependent on other countries for our energy needs. The USA from WWII to the late 60's was still a fairly low cost place for manufacturers and much of the industrial base of the developed world had been ruined by the war. Beginning in the 60's and accelerating in the 70's, countries like Japan and West Germany began to compete with us and then came Taiwan, South Korea, and China in the 80's and 90's. Plus, women joined the workforce in greater numbers starting in the 70's as societal norms changed and machines allowed them to do work that previously only strong men could do.

    We used to be a net energy exporter too until we began importing more oil than we produced. That gap has only increased as our oil production reached peak levels and declined yet our consumption went up.

    In sum, the competition for jobs paying at the low, lower middle, middle, and some of the upper middle income scale has greatly increased due to global downward pressures on labor wages while highly specialized skills in tech, biotech, finance, medicine, law, etc are still highly valued and even more so today.

    All we can do is be firm yet sensible in our trade policies (I am thinking Obama's tire tariffs are really stupid but don't know for sure yet) and work on improving our public school systems. Charter schools are starting to get more positive reviews than ever before, which is a good first step.