Matthew Yglesias » Income Trends in Recent Decades

Dec 19th, 2008 at 4:22 pm

Income Trends in Recent Decades

Lane Kenworthy posted this graph in March, but I just found it today:

And, yes, this includes taxes and transfers.

Comments
27

Filed under: Income, Inequality, taxes

27 Responses to “Income Trends in Recent Decades”

Stefan Says:
December 19th, 2008 at 4:26 pm
Class warfare! Class warfare!
Eric Says:
December 19th, 2008 at 4:29 pm
Anybody know if there’s an effect from smaller household sizes over that time period?
David in NY Says:
December 19th, 2008 at 4:31 pm
Is it me, or has Matt managed to center every line on his entire blog, including this one? I mean, lousy (or absent) proofreading is one thing, but this is ridiculous.
David in NY Says:
December 19th, 2008 at 4:37 pm
The rich

rob the poor.

And the rest of us.

They take the lion’s share

of what others make.

Where

Are the pitchforks

And torches?
Variableseeker Says:
December 19th, 2008 at 4:47 pm
Does the incidence of one-earner households matter?
duckhawk Says:
December 19th, 2008 at 5:03 pm
So… some people are super-rich. And almost everybody else is still much better off than they were before, because instead of spending $50k on products from 1980, they’re spending $50k on products from 2008.

The inequality here isn’t a big deal. Plus pretty much everything is better now for everyone than it was in the 80’s, so enacting policies to keep the rich down in the future doesn’t seem wise.
JonF Says:
December 19th, 2008 at 5:09 pm
I’m betting if this graph showed trends down to the present day, it would show another big collapse at least comparable to the 2001 downstroke, probably bigger. If there’s a silver lijing in this huge mess, it’s that the rich are taking big bath because of it.
kafka Says:
December 19th, 2008 at 5:30 pm
Superimpose the graph against the S&P 500 for the same time period and you’ll see where the wealthy get a lot of their income. The top 1 percent own about a third of the U.S. stock market’s total capitalization.
DMonteith Says:
December 19th, 2008 at 5:42 pm
And almost everybody else is still much better off than they were before, because instead of spending $50k on products from 1980, they’re spending $50k on products from 2008.

Well, since CPI already includes hedonic regression and these numbers are inflation adjusted, I’m tempted to say that you’re full of crap.
Joey C Says:
December 19th, 2008 at 5:47 pm
Truly a case of a picture being worth a thousand words.

“Class warfare! Class warfare!”

Sigh. If only…
ly_yng Says:
December 19th, 2008 at 5:53 pm
Presumably, if the economic output of the US doubled over the course of 8 years, we’d expect incomes to double, right, not increase by a fixed amount for everyone.

With that in mind, this graph is a bit unfair – you really should be showing it on a log scale, so that a doubling of a low income worker’s salary takes up the same graph space as the doubling of a top 1%er’s.

With that said, it looks like the top 1% has tripled over the past 30 years, while the middle/lower classes have stayed fairly stagnant. But the graph really does exaggerate the effect to an unfair extent.
lfv Says:
December 19th, 2008 at 6:10 pm
y_yng Says:
December 19th, 2008 at 5:53 pm

Presumably, if the economic output of the US doubled over the course of 8 years, we’d expect incomes to double, right, not increase by a fixed amount for everyone.

With that in mind, this graph is a bit unfair – you really should be showing it on a log scale, so that a doubling of a low income worker’s salary takes up the same graph space as the doubling of a top 1%er’s.

If you want to talk in terms of marginal utility and efficiency, no, that is not true. Doubling everyone’s income is not the most useful outcome.
dds Says:
December 19th, 2008 at 6:46 pm
But the graph really does exaggerate the effect to an unfair extent.

Oh noes! We’re being unfair to the rich! Their income only doubled in the past ten years! That’s only about a 7.2% raise annually!

I don’t pay rent with x% of my income, I pay $xxx.xx in rent each month. One’s proportional gains in income are not nearly as relevant as one’s absolute gains in buying power. Since the numbers in the above graph are inflation-adjusted, they are a pretty fair approximation of buying power.

(Also note this graph depicts income, not wealth. What portion of the wealthy draw income, vs. drawing their gains in wealth from investment?)
rapier Says:
December 19th, 2008 at 7:54 pm
That’s all over now. The top 1% and 10% have taken the brunt of the losses in asset prices and incomes will follow apace.

I much prefer comparisons based upon asset distribution. People and households are not really rich because of income but because of the assets they hold. Any fool can waste vast amounts of money on consumption and be broke at the end of the year

That isn’t rich. Just fun while it lasts I suppose.

The asset distribution tale was much much worse. However those numbers were fake. The financial assets absurdly inflated. They rich are being cut down to size. Madoff being only the latest if not best example. A rough guess is that the bottom 80% of Americans have lost around $2 trillion. The upper 20%, well $10 trillion, whatever, it’s huge.

So the good news is the wealthy have suffered much more relative to the rest of us. Now comes the bad news. The Fed and Treasury have taken on, say, five or eight trillion in crappy assets and taxpayers will have to bear the losses. Oh, we took those assets off the hands of the top dogs, who own most of the stocks. If that hadn’t been done their loss of assets could have been much worse. I say could have because it’s probable the panic buying of that crappy paper which was done by the Treasury borrowing money and that trillion they borrowed since May had a part in the collapse of markets. Both stock and credit markets.

Now a new scam in developing with the Fed buying up a modicum of GSE paper. This has given the illusion that this crap is good and the big banks, the Friends of Hank and Ben are unloading this crap onto the market. The institutional market. Where Aunt Millie’s pension is. But I digress.
Steve Sailer Says:
December 19th, 2008 at 10:12 pm
So, the graph shows the really big growth in high end income was during the Rubin-Summers years of the Clinton Administration. Interesting …
jps Says:
December 20th, 2008 at 3:43 am
In real terms, the median fell from 2000 to 2007.
linus Says:
December 20th, 2008 at 11:03 pm
It’s funny how the late 60s to early 80s period is still maligned as a bad time as if the era itself was responsible for rising inflation, growing crime, and peculiar hairdos.

Like today it was a mixed picture but if you were like me and can remember the later years of that time in the suburbs of Los Angeles people tended to do well still on a single family income, divorce was not yet the norm, and crime was something you heard about on tv. At the same time there was more freedom to do as you pleased – even if you were a kid – than there had been in decades, and new, interesting technologies.
duckhawk Says:
December 21st, 2008 at 4:29 am
@DMontieth: I’m aware of the CPI. There are all kinds of things outside of the BLS’s basket of goods that just didn’t exist in the 1980s. I guess I just don’t understand how the internet or ubiquitous cell phones are accounted for in hedonistic regression. Can you elaborate?
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Matt Yglesias

Income Trends in Recent Decades

27 Responses to “Income Trends in Recent Decades”

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