The ongoing economic doldrums, as well as the "occupation" of various U.S. cities in recent weeks, have focused the attention of many on inequality--not the sort, mind you, that the Founders worried about (equality of opportunity, equality before the law), but rather equality of outcome, specifically equality of wealth. A chart
appeared recently on the Daily Kos, and quickly went viral on Facebook, purporting to show that the average CEO is paid 475 times what the average worker is paid in the United States. It turns out that the statistic is untrue
, although it's unclear what the real figure is. The Economic Policy Institute
puts the ratio at 185:1, while the Institute for Policy Studies has it at 325:1.
Either way, it is clear that the ratio has been getting smaller over the years. Even according to the IPS numbers, CEOs made 475 times what workers did in 1999-2000. Of course, during those years unemployment fell below 4 percent for the first time since the early 1960s, and U.S. median income reached an all-time high, so this was hardly a period out of Charles Dickens. Moreover, those who see a connection between tax policy and inequality should recall that this occurred when taxes on the wealthy were considerably higher than they are today. (Of course, this is something which supply-siders must take into account when claiming that higher taxes are inconsistent with economic health.)
Meanwhile, my old graduate school friend John Gurney over at econscius
has been looking at inequality on a state-by-state basis. It turns out that the largest inequalities exist in the District of Columbia, New York, and Connecticut--all places where Democrats (indeed, liberal Democrats) have been running the show for a long time. By contrast, the three states with the least inequality are the GOP strongholds of Alaska, Utah, and Wyoming. Some other findings:
There is no statistical correlation between levels of inequality and whether a state has a "Right to Work" law.
There is a loose correlation between median income and inequality. The wealthier the people of a state are on average, the more inequality there is.
There is also a loose correlation between income tax levels and inequality. States with higher income taxes actually have greater inequality. Note that this does not take into account property taxes, which are notoriously regressive.