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Jul 18 / Jonathan

Increasing income inequality

From Mark Thoma, a series of posts on income inequality.

New Data Show Increasing Income Inequality points us to work published by the Center on Budget and Policy Priorities.

It should be noted that wage and salary growth has been unusually weak during this recovery, while the growth of corporate profits has been exceptionally strong. This contributes to growing income inequality, since high-income households own a highly disproportionate share of corporate assets and derive significant income from those assets. With weaker-than-normal wage growth and stronger-than-normal growth in corporate profits having continued into the first part of 2006, it is likely that the increase in income inequality that Piketty and Saez have documented through 2004 has continued since that time and that the nation’s already-large disparities in income are growing yet wider.

Thoma then points us to Paul Krugman:

I’d like to say that there’s a real dialogue taking place about the state of the U.S. economy, but the discussion leaves a lot to be desired. In general, the conversation sounds like this:

Bush supporter: “Why doesn’t President Bush get credit for a great economy? I blame liberal media bias.”

Informed economist: “But it’s not a great economy for most Americans. Many families are actually losing ground, and only a very few affluent people are doing really well.”

Bush supporter: “Why doesn’t President Bush get credit for a great economy? I blame liberal media bias.” …

Many observers, even if they acknowledge the growing concentration of income…, find it hard to believe that this concentration could be proceeding so rapidly as to deny most Americans any gains from economic growth. Yet newly available data show that that’s exactly what happened in 2004 …

…and finishes up with commentary on an ongoing argument on the subject between Greg Mankiw and Brad DeLong, and along the way providing some remarkable graphs.

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