Note: This series of posts builds on “Economists are rethinking the numbers on inequality: An academic disagreement has big real-world implications” in The Economist, November 28th 2019 issue.
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The conventional wisdom:
Over the last half-century, the incomes of the top 1% have soared.
The incomes of middle-earners have stagnated.
Wages have barely risen even though productivity has done so, meaning that an increasing share of GDP has gone to capital (e.g., physical assets, dividends) rather than to labor
The rich keep reinvesting the fruits of their success, thereby increasing wealth inequality.
Increasing income and wealth inequality are an essential feature of late capitalism.
Each argument has had its doubters. But the doubters have grown in number as a series of new papers have called the existing estimates of inequality into question. The first post of this series addressed the income share of the top 1% (“Rethinking Inequality, Part I: What's Happening to the Income Share of the Top One Percent?”). Now for Conventional Wisdom #2: Have the incomes of middle-earners stagnated? Short answer: no.
Check it out:
Some might object that Study 1 did show a decline in median income. However, the authors of Study 1 were also Study 4 authors and that study (published 15 years after Study 1) showed a substantial increase in median income. Bottom line: US median income has risen a lot over the past 40 years*. And, yes, that’s controlling for inflation (no matter how inflation is calculated).
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* Yeah, I brought it up to 2019 - because no self-respected economist believes median income has declined since 2014.
Reference:
How Different Studies Measure Income Inequality in the US: Piketty and Company Are Not the Only Game in Town. Stephen J. Rose/The Urban Institute. December 2018. https://www.urban.org/sites/default/files/publication/99455/how_different_studies_measure_income_inequality.pdf Accessed 12/28/19.