Income Inequality in the US (3/3)

Deepen the study of changes in average incomes. The following graph compares the average income level of the top 1% and Bottom 99% (in constant dollars 2008) for a century (logarithmic scale from 1 to 5).

We notice that the effect of the « Great Compression » (to borrow the term from Paul Krugman) occurred during the 30 Glorious Years: the average income of the vast majority of the population has stagnated until 1940, strongly and steadily increased until ‘in 1973, and finally has stagnated since.

Instead, high income has stagnated until 1982 and exploded since then, they eventually catch up growth accumulated: it is the « Great Divergence.  » Note that this was a delay as a percentage, but the differences have deepened in real dollars (from 10 000 to 40 000 $ is obviously not quite the same thing from 200 000 to $ 800 000)

The previous scheme, based on the work of the Congress of the United States, shows the capture made by the top of the income scale, even after taxes. In nearly 30 years, net revenues in constant dollars of Top 1% increased by 256%, while those of 80% of the population only increased by 10-30%.

The table above shows how a tiny minority phagocyte income. Thus, during the expansion Bush, the top 1% alone captured 65% of the total mass of new annual revenues. Conversely, it has captured 47% of the recession in 2008. Thus, over the past 15 years, and during two cycles, there are 52% of new revenues in the country who went to the Top 1% only.

It is observed on the uplifting chart above, showing the evolution of the different quantiles of average income, base 100 in 1996. We observe an impressive annual growth rates of the top 0.01% in 1997 +22%, +18% in 1998, +13% in 1999, +24% in 2000. And after the crash, again in 2004 +31%, +23% in 2005, +9% in 2006, +15% in 2007. These phenomenal increases seem to be an excellent predictor of major crises.

The following chart shows the evolution of the Gini index with that of the median family income:

Unlike the neoconservative doctrine, although there is increasing inequality did not accompanied by an improvement in the situation of individuals. Quite the opposite happened: the largest increase in median income has occurred with a decrease of the Gini index. It is the same worldwide, where there is no correlation:

We conclude on a note of this historical analysis of U.S. income: The following two charts show the distribution of income in the United States in 2007 and England in the seventeenth century (thanks to the remarkable work of Peter Mathias, who has analyzed the income of all classes of the population).

The result is instructive: the inequalities are much more pronounced in the United States currently in the England of the seventeenth century! Mainly due to the hoarding of milliliters (Top 0.1%) higher. 150 000 very large current account for salary thus 3-6 times more revenue than did the 186 Lords (Top 0.01%) and 1400 Baronets and knights of the English aristocracy of the seventeenth century …

Recall that Barack Obama has just extend tax cuts passed by George Bush could not limit those granted to higher income because of his defeat in parliamentary elections in November. They were estimated at 860 billion dollars over two years …

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Tags: Inequality