I've been following the income inequality issue lately, and have learned a few more interesting tidbits:Megan McArdle
of The Atlantic
further buttresses my earlier point
about inequality rising and falling with the overall health of the economy. That is to say, in terms of income the wealthy benefit disproportionately during times of prosperity, but their income also shrinks disproportionately during recessions. Also note that unlike the studies I cited in my last post, McArdle looks back farther than the 1950s. In fact, even according to these statistics income inequality is not too far out of line with the averages for the past century.
But then, what determines whether someone is in the top quintile of income earners, the bottom quintile, or somewhere in between? Mark Perry
of the University of Michigan has looked into the characteristics of households at each level, and has identified the most important variables. Those at the top tend to share certain attributes--they have more than one income earner (that is, they are married), those earners are in their prime earning years (between 35 and 64), and they have college degrees.
All of this points to an argument made by Shikha Dalmia
--that what is overlooked in the search for alleged bad news in income inequality is the fact that there is still tremendous social mobility in this country. Indeed, there is perhaps more today than at any time in U.S. history. Today's wealthiest Americans are almost certainly not the same as those at the top twenty years ago; many likely were at the bottom quintile at that time.
But there's another story that the statistics on inequality fail to reveal: the fact that ordinary people are living far more comfortably than they did in the 1960s. When I was a child, growing up in a solidly middle-class family in the 1970s, a vacation meant a two-hour drive to a lake somewhere--having flown on a commercial jet was an indicator of great affluence. So was ownership of a microwave oven, a portable telephone, or a computer. For all the hype we hear today about the sufferings of the middle class, how many members of that class do not own these things today? Are they not regarded as necessities of life?