The Least, First

Monte Asbury's blog

A dramatic graph: income growth by income quintile

with 2 comments

Here’s another great find by the Freakonomics blog.

Dark bars, below, represent income growth across the economic spectrum from 1947-1973.  The least grew the most (br-r-ravo!), and the middle and upper classes did pretty well, too.

The light bars tell a more troubling story.  In recent times (73-05), the smallest incomes grew (as a percentage) the least.  In fact, without exception, the more income a quintile received, the greater was the percent of increase in that quintile’s paycheck. The least (thus), benefited least. The first, the most.

Put another way:  the economy disproportionately rewarded high-income people.  And it hasn’t always been this way.

clipped from freakonomics.blogs.nytimes.com

Economic Growth Across the Income Distribution

Yes, we already know the facts — income inequality has been increasing since the 1970’s. But it can be easy to lose sight of just how important this has been. This presentation of the data — by Claudia Goldin and my former thesis advisor Larry Katz, really hits home:

INSERT DESCRIPTION
Note: The figure plots the annual percentage growth rate in mean real family income by quintile and for the top 5 percent of families for 1947 to 1973 and 1973 to 2005. Incomes are converted to constant dollars using the Consumer Price Index Research Series (CPI-U-RS). The income concept used is the official U.S. Census Bureau measure of pre-tax, post-transfer money income.
Read the full Goldin and Katz posting, over at VoxEU, for a deeper understanding of why. (Hint: It’s education.)
[T]hese data remind us that for most of the distribution there hasn’t been much income growth.

Seeing it in graphic form is startling, eh?

Follow the link to the original article to explore the thesis that this all springs from education issues.

Thought-provoking! What’s your take?

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2 Responses

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  1. Well put. And a real question for which I have no answer. Kind of a pointless response I know, but it moved me to think. And I thank you.

    Rick Reiley

    June 16, 2009 at 2:04 pm

  2. I know I might get kicked out of the country for this, but I wonder if the meritocracy is a sustainable model. Don’t get me wrong, I love it, but I also benefit from it because things that I’m good at happen to be in high demand right now.

    I wonder how we handle people who’s gifts are not currently en vogue?

    I wonder if the we are both blessed and cursed by living in America, in the sense that our great economy creates great opportunity, but also draws great competition from around the world? Most of the people with whom I compete for jobs are not native to the US, nor are they typically from the middle tier of their native country’s talent pool.

    I wonder if, because of a variety of factors including those mentioned above, we’ve simply reached a point where most of the people within the US who might climb economically have, and we just need to figure out what we do with everyone else (give or take a few)?

    I also wonder if, based on this, the US can continue to be the economic engine of the world. It seems to me that their needs to be an overall expansion in GDP for all countries, thus creating their own wealth and economic opportunity, not only for benefit their own middle and lower classes, but also to decrease some of the competition faced by ours.

    I glossed over some details in this already long post, but if anything doesn’t make sense or needs challenged, I’ll gladly comment again ;-)>

    Joe Hayes

    June 15, 2009 at 4:30 pm


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