So what if the rich are getting richer?

Posted by Kromey at 7:39pm Oct 10 '11
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First, we should agree that there's nothing wrong with the rich getting richer. It would require a selfish, ignorant, and hateful person to want anyone to get poorer. I might not be rich, but I have no vindictive anger that desires that those who've had better fortune do poorly just because I've not done as well myself. That kind of trite material jealousy is best left in grade school.

Second, we should agree that even if the rich are getting richer and the poor are getting poorer, the good fortune of the rich is only objectionable if it came at the expense of the poor. It is not honest or useful to complain about some people doing well simply because other people aren't doing as well unless it can be shown that one's success came at the expense of other people's failure.

So what do the numbers say? As usual, the numbers can pretty much say whatever you want them to say. If you check the U.S. Census Bureau , we can see that in 1967 the lowest fifth of wage earners earned 4.0% of the total national income and in 1998 they earned 3.6%--a decrease of 0.4% over 20 years. In the same time, the highest fifth of wage earners went from 17.5% to to 21.4%. Using these numbers, you might make the argument that the rich did indeed get richer while the poor got poorer.

However, this is--in and of itself--a shallow argument. It's entirely possible that everyone got richer, but the rich got a larger portion of the new wealth. For example, perhaps the poor earned $100 and the rich earned $1000 while a few years later the poor earned $150 and the rich earned $2000. In this case, even though the poor person is earning 50% more, his share of total income will have dropped from 9.1% to 7.0%. The fact that their share of total income dropped doesn't mean they got poorer.

In fact, that's exactly what appears to have happened. Referring to the chart on page 5 of the same link, we see that the top of the lowest fifth bracket went from $13,471 in 1967 to $16,116 in 1998, a growth of 19.6% in real terms. During the same time, the top fifth of wage earners went from a minimum of $53,170 in 1967 to $75,000 in 1998, a growth of 41.1%. Similar increases can be observed in each of the income brackets.

Everyone got richer, but the rich got richer faster.

This is hardly surprising. Someone that is rich is going to have more extra money that they can invest which, in turn, creates more money. Money generates money and no-one disputes that being rich is, by definition, a financial advantage in a capitalistic society. Short of draconian wealth redistribution, this will always be the case. However, the macro-economic data from 1967 to 1998 does not support the assertion that the rich got richer and the poor got poorer. The data supports the position that everyone got richer. While there may be year to year variations in a negative direction, the long-term trend is that all Americans are getting richer.

[Not written by me. Hunting down the original source, as well as the aforementioned link to the US Census Bureau report.]

added on 8:17pm Oct 10 '11:
Here's a Census Bureau link that shows what the post above talks about in the 5th paragraph. Note, however, the caveat that data collection methodology changed in 1993, meaning that pre-1993 data and post-1992 data are not strictly comparable; however, looking at each chunk of data independently, we still see the same result -- everyone got richer, the richer just got more richer. And this trend holds too when we look at the bottom bottom 10% as well (the lowest bracket this particular link shows).

Oh, and one thing not mentioned in the post above -- all income measures are inflation-adjusted to 1998 dollars, i.e. an income of $13,471 in 1967 in fact represents a person getting a check for $2,747 that year (well, a series of checks, but you get the point).
added on 8:28pm Oct 10 '11:
Oh, actually, it appears that that link really is the report mentioned in the post, I was just drilled down into the charts and figures. The report itself, along with all charts and figures used therein, can be found here ("The Changing Shape of the Nation's Income Distribution"; I haven't looked at the other one at all).
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