INcome Inequality

John Edwards hung his presidential aspiration hat on the notion that there were two (he said) or maybe three groups of Americans—the rich, exploiting everyone; the downtrodden poor, forgotten and left behind; and the ones in the middle, generally getting the shaft. Americans listened in 2004 and didn't buy. Nor did we buy in 2008 when Edwards did worse than in 2004, though in 2008, Edwards did beat Bill Richardson. Perhaps one explanation for Edwards' performance is that his sales pitch wasn't true. Iowans, after all, have practice at such analysis.

In the March 10 Wall Street Journal, Brad Schiller, an economics professor at two universities, reviews the latest household income data from the Census Bureau. The starting "fact" is, "the top-earning 20% of households get half of all the income generated in the country, while the lowest-earning 20% get a meager 3.4%." Well, OK, Schiller says, except that...

For example, the real income of that lower 20% is up about three-fold since 1970. Schiller talks about household size, which has declined, meaning that more people have enough money to live on their own. Young adults are one example. My daughter isn't earning much, but she is managing. Immigrants, he notes, typically come in at the bottom of the income scale. 

The broader point, which Schiller doesn't quite say, is that the membership in each income group is dynamic and changes over time. Young people join the the earning world at lower incomes and, typically, earn more over time and move up. For immigrants, the moving up may be from generation to generation, but they do, usually, earn more. From the top group, people move down, perhaps through financial setbacks or retirement. Or perhaps because people rapidly climbing the earning ladder muscle them out. 

Overall, Schiller says, "When you look at the really big picture, it's apparent that living standards are rising across the entire spectrum of incomes."