Thursday, December 5, 2013

Social Factors And Not Economic Factors Are Cause Of Increase In US Income Inequality Over The Last 50 Years

From Political Calculations, "The Major Trends in U.S. Income Inequality Since 1947" by Ironman:

Source:  Political Calculations

After 1960 however, ... the level of income inequality among U.S. individuals stabilized. The Gini coefficient for U.S. individuals has been essentially flat ever since, falling within a very narrow range.

That observation is significant because if income inequality in the United States was really rising as a result of economic factors that concentrate an increasing amount of income into progressively fewer hands, we would not observe this outcome because income payments are made to individuals, not to households and not to families. That basic reality means that a rising level of economically-driven income inequality would be most prominently evident among the distribution of income for individuals as measured by the Gini coefficient if it were actually taking place - just like it did in the post-World War 2 recovery years from 1947 through 1960.

We do however observe such a rising trend in measured income inequality in the Gini coefficients calculated for U.S. households and for U.S. families. Interestingly, we don't see much of that change occurring when economic factors were actually driving up the level of income inequality among individual American income earners in the years from 1947 through 1960. Instead, we see that the overall trend for household and family inequality was basically flat during this time, which then continued through the 1960s. It's not until 1970 that we find that a rising trend in the amount of income inequality for U.S. households and families begin to take hold.

From 1970 through 1992, we see that the amount of income inequality among U.S. households and families increases steadily - and since we don't observe a similar trend among individuals, we must conclude that social factors, such as the changing composition of the nation's families and households over time, are the primary cause of that trend. [Emphasis added.]

No comments:

Post a Comment