The ‘imaginary hobgoblin’ of ‘rising income inequality’

gini We hear all the time about “rising income inequality” in America (there are more than 1 million Google search results for that term), about “the rich getting richer and the poor getting poorer,” the “stagnant or disappearing middle class,” all of recent income gains going to the rich,” the lack of income mobility and other narratives of pessimism. And yet, nobody seems to have shared those negative narratives with the Census Bureau data on US household income, income dispersion and income inequality, because those data tell a much different story.

1. The top chart above shows the share of total income earned by the top 20% of US households from 1993 to 2012 (from Table H-2). In 1993, 49% of total income went to the top quintile of US households, and 20 years later in 2012 (most recent year available), the share of income going to the top 20% has increased to only 51%. Over the last two decades, the income share of the top 20% has been remarkably stable at about 50% and there has been no evidence of “rising income inequality” according to this measure.

2. The bottom chart above shows annual Gini indexes of income inequality (a statistical measure of income dispersion that quantifies income inequality on a range from 0% for complete equality to 100% for complete inequality) for US households from 1993 to 2010 (most recent year available). Like the first measure of income dispersion, the Gini indexes reveal that there has been no significant trend of “rising income inequality” for US household income in recent decades – the Gini index in 1993 was 0. 454 and in 2010 it was 0.469, and has been remarkably stable for the last several decades.

MP: Whether we look at Census Bureau data on the share of total income going to the top fifth of American households, or Census data on Gini coefficients for U.S. household income, there is absolutely no statistical support for the commonly held view that income inequality has been rising in recent years or decades. A more accurate description of income inequality over the last several decades would be to say that it “flat-lined” starting in about 1993.

So why are we even having this national debate about solutions to the “non-problem” of rising income inequality that doesn’t even exist by these Census Bureau measures? Maybe it’s another example of what H.L. Mencken called an “imaginary hobgoblin“:

The whole aim of practical politics is to keep the populace alarmed (and hence clamorous to be led to safety) by menacing it with an endless series of hobgoblins, all of them imaginary.



31 May 2014 | 2:48 pm – Source: aei-ideas.org
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