From National Center for Policy Analysis, re-posted in its entirety.
Debunking Income Inequality Myths
Income inequality may be a popular topic, but it’s also one that’s largely misunderstood. Rachel DiCarlo Currie, a senior fellow at the Independent Women’s Forum, explains the state of income inequality in America and debunks some popular misconceptions about the distribution of wealth in the United States.
Currie identifies three common beliefs about income inequality:
Since the late 1970s, middle-class incomes and living standards have stagnated.
Social mobility has declined.
The United States has far worse income inequality than does Western Europe.
These conceptions may be popular, but are they accurate? Not quite, says Currie. As for incomes, according to the U.S. Census Bureau, median household income in 2013 was only 6 percent higher than it was in 1979. However, those figures only look at pretax income — ignoring government welfare transfers, capital gains and employer benefits such as health insurance — and they aren’t adjusted for changes in household size. Using Congressional Budget Office data that does take into account household size, tax credits, government transfers, capital gains and employer-provided benefits, median household income increased 47 percent from 1979 to 2011. Significant gains took place among middle-income earners, with incomes rising 35 percent to 45 percent.
What about social mobility? Despite rhetoric, it’s stable: people are still moving up the income ladder, and a 2014 study found that mobility has been stable for decades, despite increases in income inequality. However, Currie does identify one area that is responsible for sluggish income growth: the drop in the marriage rate. A study from Robert Lerman and Brad Wilcox found that median family income growth between 1980 and 2012 would have been 44 percent higher if the married parenthood rate had remained stable.
While a 2011 study from the Organization for Economic Cooperation and Development identified higher income inequality in America than its Western European peers, Manhattan Institute Senior Fellow Scott Winship determined that, ignoring that top 1 percent of households, income inequality in the United States is equal to that in Europe. Moreover, Currie notes that family breakdown is much more prevalent in the United States.
Lastly, raising taxes on high earners is not the answer. If lawmakers want to improve mobility and opportunity in America, they should focus on improving the country’s economic environment. She suggests supporting apprenticeship programs, reducing burdensome occupational licensing requirements, expanding the Earned Income Tax Credit and eliminating marriage penalties.
Source: Rachel DiCarlo Currie, “Understanding Income Inequality,” Independent Women’s Forum, January 22, 2015.
Truth is, my wife and I are probably in the 1% or close to it. We both worked our way through school (though I had the GI Bill to help). We made some good investments and saved a lot. Our kids have graduated from college now and both have good jobs.
I’ve read a lot on the income equality issue and the facts seem clear: There is a large and growing disparity. A study of government upheavals done back in the 80’s found that most rebellions in history didn’t occur because folks had been oppressed for a long time. They occurred when people who were doing all right realized that they they were losing what they had (I think many in the various tea parties would relate to that).
We, like most parents today, don’t believe that our kids will be able to duplicate our success. This, along with our generations’ failure to properly school many in the next generations, is going to make for what the Chinese call “interesting times.”
It doesn’t matter what your politics are: when the storm threatens you need to act together to preserve your community. I’ve watched most policies (democrat and republican) aimed at improving the lot of the middle class fail during my lifetime.
We need a new approach and we have to give it the same weight that we now give to terrorist threats. Some guys killing Americans in Syria aren’t going to bring us down. Giving our kids no hope for a better future will.