Friday, August 11, 2017

Not big enough

A team – Thomas Piketty, Emmanuel Saez, Gabriel Zucman – that researches inequality created a chart to show the increase in income inequality. It took me a moment to figure out what the chart is saying. Once I did the message is powerful. I’ll let you look at the chart here as I explain.

There are two lines on the chart, the gray one for 1980, the red for 2014. The dots on the line represent percentile. The leftmost dot at 5th percentile means it represents people that have income above 5% of the population – they’re quite poor. 95% of the population has higher income. At the right side is the 99th percentile – people whose income is above 99% of the population. These people are the 1%. The red line continues to those making more money than 99.999% of the population, or the .001%.

The height of the dot represents how much a person in that percentile sees in annual income growth. In 1980 those in the 5th percentile saw income growth of about 3.3%. In 2014 those same people saw a negative income growth of about 0.1%. In 1980 from about the 40th to 80th percentile income growth for everyone was about 2%.

At the other end of the scale, in 1980 the 99th percentile saw income growth of about 1.3%. In 2014 these people saw an income growth of about 2.2%. Overall in 1980 as income rises income growth is smaller. In 2014 as income rises income growth increases.

The important news is what happens above the 99th percentile. In 2014 the 99.99th percentile saw an income growth of 4% and the 99.999th percentile saw an income growth of a huge 6% – at a time when the poorest saw their income shrink.

The main point: Huge income inequality isn’t inevitable. Not so long ago inequality was getting smaller. Policy decisions over the last 34 years meant more money to the rich and less for the poor. Different policies would produce different outcomes.

But the nasty guy, the GOP in Congress, and the big donors pushing for a “tax reform” which is really a tax cut for the rich think that the inequality isn’t big enough.

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