Tuesday, November 19, 2013

US Income Inequality In Six Charts

John Cassidy uses six charts to describe income inequality in America.  The data are very revealing.  The level of income going to the top 1% has varied substantially over time.  It peaked prior to the Great Depression and fell to a steady level before peaking again prior to the Great Recession.  Some believe there is a causal relationship between the rise in inequality and stagnation but the question has not been studied enough to reach a firm conclusion on causation.

Another chart shows the level of income inequality in the US and other nations.  The major finding is that many nations have high levels of income inequality that compares with that of the US.  The major difference between the US and other nations is that income inequality in the US after taxes is much higher than it is in other nations.  That is because US tax policy and transfer payments is less progressive than it is in other nations.  Many other nations use government policies to make after tax income more equal than does the US.

It is also interesting to observe the regional distribution of income inequality in the US in relation to a measure of social mobility.  Social mobility is much lower in the South and in the Mid-West than it is in the other regions.  In other words, it may be more difficult to move up the income ladder in areas with high levels of income inequality. 

It is somewhat discouraging to observe that public opinion in favor of income redistribution policies in the US has not risen with the rise in income inequality. Many Americans cling to the myth of Horatio Alger and they are either uniformed about the reality or indifferent to it.

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