The New York Times made waves this week with another piece on inequality, saying that it has not risen since 2007. The article was based on this paper by GWU’s Stephen Rose.
The article also suggests that expansions are not a good way of looking at trends in inequality (as I have done in the past, also covered by the NYT). Instead, one needs to look at the business cycle. It also concludes that, thankfully, because of government tax and transfer policies, inequality has not been “that bad” over the last few years and governments can clearly do something about it.New Economic Perspectives
So what’s wrong with this picture?
David Leonhardt’s headlines reads “Inequality Has Actually Not Risen Since the Financial Crisis” and his chart, provocatively titled “The Rich Have Gotten Poorer Since 2007,” shows that the incomes of the highest-earning households (top 1, top .01, and top 10 percent) have fallen even more than the income of others.
Really?
Well, yes and no. Yes, incomes at the top have fallen more than the incomes of everyone else since 2007—but those at the top are certainly not “poorer.” And, even more important, no one has claimed top incomes didn’t fall off during the Great Recession. Of course they did, since those at the top receive most of the capital gains generated in the economy and the crash in equities wiped away a good portion of their wealth.…
But the real questions are, what happened before the crash? And what’s happened since the recovery began? And there the charts don’t lie: those at the very top have made out like bandits while everyone else is forced to continue to subsist on their meager, unchanging incomes.…Occasional Links & Commentary
