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I recently asked this question about a statistic quoted by Kurt Andersen designed to illustrate the current wealth distribution in the USA in his book Evil Geniuses. It provoked a great deal of (unintended) discussion as I only wanted to check whether his illustration was correct.

But he makes many other claims in the book (which are more relevant to much of the unintended commentary).

He specifically claims that the US distribution of income and wealth has skewed spectacularly in favour of the rich in the last three or four decades. In his words (my highlighting):

Before 1980, all Americans’ incomes grew at the same basic rate as the overall economy. Since 1980, the only people whose incomes have increased at that rate are people with household incomes in the range today of $180,000 to $450,000. People with incomes higher than that, the top 1 percent, have gotten increases much bigger than overall economic growth. (Meanwhile 90 percent of Americans have done worse than the economy overall.)

and

During the grand decades between World War II and 1980, when U.S. median household income more than doubled, 70 percent of all increases in Americans’ income went to the bottom 90 percent. Since 1980, nobody’s income has doubled except for the richest 1 percent, and the incomes of the entire nonrich 90 percent of Americans have gone up by only one-quarter.

Are these claims accurate in describing how inequality has skewed in the US since 1980?

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    The important thing to remember is that the “top x%” is far from static. It’s more of an economic or statistical metric than an individual metric. For Americans: 70% enter the top 20% of earners, 53% enter the top 10% of earners, 36% enter the top 5% of earners, 11% enter the top 1% of earners. cbsnews.com/news/here-are-your-odds-of-joining-the-1-percent
    – Matt
    Apr 2 at 7:43
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    @Matt That point is interesting but not as clearly a refutation of Andersen's thesis as it looks at first glance. Some studies show a lower effect and even that link says "In the U.S., more than many other countries, if you're born into poverty you'll likely stay there". An answer would quote that study and compare it to others to test its thesis.
    – matt_black
    Apr 2 at 9:18
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    I mean that's cool and all, but I'm curious why that matters so much? I would think the more relevant question would be whether the poor/middle class are treading water or even losing ground on an absolute scale.... Apr 2 at 14:01
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    @JaredSmith That's a related question but not this question. The answer might add some nuance to an answer to this question but it doesn't itself address the question.
    – matt_black
    Apr 2 at 17:09
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    In things like ability to use money to buy political influence, the distribution of wealth in society is an absolute scale.
    – prosfilaes
    Apr 2 at 23:10
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According to Pew Research, the difference in median income classed by income strata, expressed in 2018 dollars, from 1970 to 2018, has skewed hard toward the rich, with both the middle and the poor losing ground as a relative share of total income in the US. Image from Pew Research

It is important to note that, as far as Pew is concerned, the top quintile is the typical grouping for the rich, and the top 5% is a particular subset also analyzed in the article.

Their analysis of the 90-10 ratio shows that, when compared with the G7, the USA has the greatest level of income disparity all told.

enter image description here

Kurt Anderson's claims pass the smell test in light of this data, with the numbers he provides being ballpark accurate, when you normalize to 2018 dollars. For those who are unfamiliar with why we express money in a given years currency, it's to account for inflation, so its a more accurate representation of buying power across time (where a dollar in 1970 would buy much more than a dollar in 2020).

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  • What about the distribution of wealth? Is it different from the distribution of income?
    – asmaier
    Apr 4 at 10:39
  • Do these numbers account for government transfers and taxes? This article claims that these factors not being accounted for is the source of income inequality in the Census Bureau data. Apr 14 at 0:55
  • @asmaier distribution of wealth is much harder to track, as wealth is not regularly reported to authoritative bodies.
    – GOATNine
    Apr 15 at 12:02
  • @HyperdriveEnthusiast Income inequality is a measure of gross income, not net income. While gov't transfer programs would definitely factor in a significant amount, it doesn't alter the base premise that income inequality has been widening in recent years. Keep in mind that transfer programs generally don't factor for inflation, and so lag behind in terms of real value year-after-year.
    – GOATNine
    Apr 15 at 12:52
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Yes. (every metric I've looked at says that the distribution has become more skewed; whether it is "much" more skewed depends on which metric you look at, and how big you consider "much" to be ...)

This figure from a 2019 McKinsey study shows trends in the Gini coefficient over almost four decades (1980-2014), supporting the claim that income inequality has increased dramatically in the US (roughly in parallel with changes in other G7 countries, although France is much flatter and the UK had a really dramatic increase in the 1980s). The disadvantage of the Gini coefficient is that it's a different metric from the bottom 99%/top 1% quantity that Andersen uses (so it could be telling a different story, although that seems unlikely); the advantage is that it measures inequality across the whole spectrum of incomes, so that it's harder to cherry-pick cutoffs (90/10, 99/1, 99.9/0.1, etc.) that support a particular story. (This figure also measures "equivalized [whatever that is] disposable income" (emphasis added), so that could presumably also change conclusions; overall, though, it seems to support the conclusion.)

Gini coefficient 1980-2014 for Japan, Germany, France, UK, Italy, US

Another view, from the Congressional Research Service report The U.S. Income Distribution: Trends and Issues: this is over a slightly different time period and shows two different ways to break down income growth rate distribution:

  • at the level of quintiles, from 2009 on there was progressively faster income growth in higher quintiles. The biggest jump is between the second quintile (60th-80th percentile) and the top quintile (>80).

US quintile trends 2007-2019

Or, we can compare growth rates in progressively smaller slices of the top end of the distribution (bottom 90%/top 10%, 5%, 1%, 0.1%, 0.01%). Here growth rates also skew higher in higher income slices (although top 0.1% is greater than top 0.01% for 2009-2019).

US top brackets trends 2007-2019

I think all of this data broadly supports the claim. You could certainly make an argument that: "the most relevant comparison is (2d and 3d quintile) vs 4th quintile, and the growth rate difference between those categories is only 2%, which isn't very much", but at that point we would be having a "how-long-is-a-piece-of-string" (and "which-bit-of-the-string-is-the-best-part-to-measure") argument ...

If anyone wants to do the work to get the numbers that compare (say) the 20th-80th percentile with the 80th-90th percentile (to remove the top decline that @blankip feels is driving the whole pattern), I'd be curious ...

OK, here it is, data from https://wid.world/data/ : the lefthand plot is the mean incomes of the 20th-80th percentile and 80th-95th percentile, 1980-2019 (inflation-adjusted, I think to 2019 dollars). The righthand plot shows the year-by-year ratio of the change in income; the points in red are outliers >10 (up to a ratio of 51.2 for 1981 ...) which were squashed for display purposes. The line is a robust linear model (best-fit straight line, downweighting extreme points). Conclusion: top (80-95) US incomes were growing 2 to 5 times faster (in inflation-adjusted dollars) than middle (20-80) incomes.

Put another way, the middle incomes increased by 47% over this time period, the top incomes increased by 86%.

enter image description here

data here (I'm not sure of the difference between "inc1" and "inc2", one is labeled "equal split" and the other is "individual". This is "Pre-tax national income, average income or wealth, adults, ..., constant local")

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    My only criticism is that the final table is very long and hard to read. It would probably be far easier to comprehend as a chart.
    – matt_black
    Apr 3 at 13:06
  • Nice collection of data. I'm just not sure why you put the very first sentence. Every single one of your charts shows that the distribution has become more skewed toward to the top.
    – quarague
    Apr 3 at 17:22
  • I was trying to avoid arguments about the meaning of "much". Clarified.
    – Ben Bolker
    Apr 3 at 17:50
  • What about the distribution of wealth? Is it different from the distribution of income?
    – asmaier
    Apr 4 at 10:42
  • Maybe put the data table on gist.github, or wasn't there a stackexchange paste service?
    – Nobody
    Apr 4 at 15:27
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Yes. The following spectacular charts from the former secretary of labor and professor at the University of California, Robert B. Reich, illustrate in a striking fashion how the income of "production and non-supervisory workers" stopped growing with productivity some time before 1980. The connection between economic growth and lower incomes was severed. Profits started to go elsewhere.

The claim that a profound change occurred some time before 1980 is specifically corroborated by this data.

Charts with timelines of income and productivity I'm linking from the New York Times online, September 4, 2011, so the data is 10 years old. An accompanying article by Reich from September 3, 2011 ("The Limping Middle Class") makes the following analysis:

Although productivity continued to grow and the economy continued to expand, wages began flattening in the 1970s because new technologies — container ships, satellite communications, eventually computers and the Internet — started to undermine any American job that could be automated or done more cheaply abroad.

According to Reich,

  • the government deregulated and privatized;
  • cut spending on infrastructure;
  • undermined labor organization;
  • shifted the cost of higher public education to families;
  • allowed unchecked globalization of American companies;
  • cut income taxes at the top and increased them below;
  • deregulated the financial sector while insuring it against losses;
  • let finance dominate production instead of the other way around.

The top five percent of Americans around 2010 made 37% of all consumer purchases, and financial services accounted for 40% of corporate profits, up from 10 percent during the "great prosperity" (1950s-1970s).

One detail that I found particularly striking is that in most households today both partners must work to keep up the standard of living that was once provided by a single earner, something many readers can probably relate to.

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    "the standard of living that was once provided by a single earner" ... you mean, homecooked meals (no eating out or drinking fancy cocktails at bars), zero or one bathroom per house, one or two bedrooms per family, zero or one TV that gets 3 or 4 channels, no home computer, one landline phone, one car, no air conditioning, no nails/waxing/haircuts by people outside the family, obviously no streaming services, homesewn clothes and/or hand-me-downs from older family members...?
    – shoover
    Apr 9 at 23:41
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    @shoover I think not all families today with double earners enjoy all of the added quality you describe, and not all of the single-earner families were missing it in 1980 (e.g., in America it was probably not uncommon to have two cars and go to the hairdresser). There is probably some added luxury coming from a double income but probably not proportional. The comparison is also complicated. Some things like smartphones or streaming were James-Bond issue in 1980. Apr 10 at 9:44
  • @shoover Another thing is that "standard of living" in this context is not a static enumeration of material wealth but the dynamic property of belonging to a social stratum. The point is that today, often both adults must work to not slide back economically. The absolute wealth may be larger; the relative position in a society that is altogether richer than 40 years ago has not risen. That is, I think, the whole point of the article: Productivity has risen enormously; wages for the middle class have risen as well but not as spectacularly. (For the bottom fifth they have even fallen.) Apr 10 at 12:18

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