Here is the trajectory of growing income inequality over the past half century:
As measured by the GINI metric, inequality skyrocketed during the '70s and '80s. Then, very abruptly in 1993, it slowed down. Inequality has been growing steadily ever since, but at a moderate rate. Nevertheless, the US now has the highest income inequality of any advanced economy in the world—by far.
But what happened in 1993? That's a bit of a mystery.
nothing happened; you’ve just picked arbitrary dates and drawn trend lines cause you don’t understand how any of this works.
In advanced economies the gini index has an asymptote at about 0.5. To get to 1.0, one person would have 100% of income, which is not actually possible. At 0.5, about 1% of the population has about 50%, which given government spending in a country with a giant defense budget and social security is realistically about as high as it can ever get. So the index is curving to meet 0.5.
Well, if you want to get technical about it....
😉
(I still want to blame Clinton for slowing the increase)
Ain't we got fun!
https://www.youtube.com/watch?v=y041-eT6QrI
I'd guess the start of the sharp increase was a change in CEO compensation. And the rich are still honing how to get the most out of that, plus the addition of "off shore" accounts, tax optimization (wouldn't dare call it evasion), capital gains, etc....
Thus bloviateth a pompous nobody.
I don't think so. I'd have to experiment with some different asymptotic functions, but to my eye there's a pretty sharp break around 1992 that wouldn't fit. It would be awfully hard to draw a reasonable asymptotic function that follows that. At best you could draw an asymptotic function with a significant divergence at that time, which just begs the question.
"... but to my eye there's a pretty sharp break around 1992 that wouldn't fit. ..."
See my comment below. The break probably isn't real but reflects a change in the way they collected the data.
Neither of your comments makes any sense about the graph here. It is true that often it seems subjective how to fit the trendlines to a curve. But in this case not so much. The data points go in a straight line with one slope for a while and then go in a straight line with a different slope for a while.
Changing how the data is collected could lead to a discontinuity on the curve. So if it was going along at a steady slope for a while and then suddenly jumped and otherwise kept going at that slope your explanation would work perfectly. But that isn't what is happening. Changing how data is collected shouldn't change the slope, it should change the absolute value.
"Changing how the data is collected could lead to a discontinuity on the curve. So if it was going along at a steady slope for a while and then suddenly jumped and otherwise kept going at that slope your explanation would work perfectly. But that isn't what is happening. ..."
From my comment below the yearly data points starting with 1989 were (.431, .428, .428, .433, .454, .456, ,450, .455). There is an clear discontinuity between 1992 and 1993. If this were taken out the graph would look quite different. Even if you still believe there was a change in slope it would have occurred in 1989 (or earlier) not in 1993 as Drum claimed.
How does somoen become as grossly incompetent and spectacularly ignorant as you?
Somebody says "Nothing happened."
Ken Rhodes (me) says WRONG! After 12 years of Reaganism, we elected Clinton. If you think Clinton economic policies were nothing different from Reagan policies, you are simply too young to remember.
And yet post clinton we had 8 years of bush but nothing changed…
So you’re saying W’s economic policies are the same as Clinton’s.
Do you see why your argument is stupid and makes no sense?
The Peace Dividend?
(remember the moment of serious panic wingnuts were in about the peace dividend at the end of the Cold War, publicly complaining about how it might help people?)
What happened is that real wages crashed during the high inflation of the 70's and 80's - that is nominal wages did not increase nearly as fast as prices:
https://www.skeptometrics.org/BLS_B8_Min_Pov.png
But GDP/capita (productivity) continued upward. GDP did drop in the recessions of the early 80's, but rapidly recovered. So real wages hit bottom in the early 90's with the end of high inflation, but the rate of increase of wages since then has still not matched productivity growth.
Since around 1972, most of the increase in output (productivity) has been going to upper incomes, but nominal wages have exceeded inflation (slightly) since the middle 90's.
Major reasons for the big drop up to the 90's are thus the inflation and the response to it by the Fed, which deliberately caused recessions, but many other things have been going on. Once Republicans effectively got control of economic policy, by getting votes from lower-income whites with racism and religion, all sorts of laws and policies were changed, in order to deliberately increase profits and upper incomes.
Kevin and others often show the divergence of productivity and wages, but they typically start around 1980. This obviously leaves out the greatest divergence, which was in the 70's.
High inflation ended in 82. So that more or less destroys your thesis.
The Internet.
By 1993, it had begun to show it's potential, and developed enough technical standards and protocols to build out a technology economy (and displace the brick and mortar store, newspaper, etc.)
Also, we offshored a lot of physical labor, and in doing so, increased living standards in other nations.
Are you nuts? Nobody was online for news and retail shopping in 1993. It wasn’t a thing.
It really wasn’t substantially a thing until much much more recently.
I don't see an increase in the 1970s here. I see a major increase after 1980, when one Ronald Reagan become president. This level of inequality, of course, is a feature and not a bug for his economic policy.
Well spotted. A better graph would go back to maybe 1950. It may well be that 1950-1980 looks a lot like, say 1992-present and the stretch between 1980 and 1992 is the anomaly.
You got that right. Look at what Reagan said about the marginal tax rate here:
https://toomuchonline.org/the-tax-that-turned-ronald-reagan-right/
and specifically about loafers. Projection isn't a new phenomenon...
I think around that time, the way corporations were taxed on executive compensation charged. That's when exec pay swerved away from actual larger paychecks to stock incentives. Of course, that also changed executive motivation.
In any case, Reagan himself finally caught on that maybe he'd gone too far. But, too late...
https://itep.org/a-surprising-idea-from-the-era-of-reaganomics/
In 1993 the Democrats regained the presidency.
I asked Gemini: Key economic related events in 1993
The answer was:
1993 was a significant year for the global economy, marked by several key events:
**1. Clinton Administration Economic Policies:**
* **Budget Deficit Reduction Act:** President Bill Clinton signed this act in August 1993, aiming to reduce the federal budget deficit through tax increases and spending cuts. This marked a significant shift in economic policy compared to the previous administration.
* **NAFTA:** The North American Free Trade Agreement was signed in 1993, creating a free trade zone between the United States, Canada, and Mexico. This agreement aimed to stimulate economic growth and job creation in all three countries.
**2. Global Economic Trends:**
* **Economic Recovery:** The global economy began to recover from the early 1990s recession, although growth rates were still relatively slow.
* **Increased Unemployment:** Despite the economic recovery, unemployment rates remained high in many countries, particularly in Europe.
* **Inflation Concerns:** Inflation rates were a concern in some countries, leading to tighter monetary policies from central banks.
**3. International Economic Cooperation:**
* **Uruguay Round of GATT:** The Uruguay Round of negotiations under the General Agreement on Tariffs and Trade (GATT) concluded in 1993, resulting in significant reductions in trade barriers and the establishment of the World Trade Organization (WTO).
* **European Union:** The European Union continued to integrate its economies, with the Maastricht Treaty establishing the European Monetary Union and the euro currency.
**4. Other Notable Events:**
* **Bank of England Independence:** The Bank of England gained operational independence from the British government in 1993, allowing it to set interest rates independently.
* **Asian Economic Crisis:** The Asian financial crisis began in 1997, but its effects were not fully felt until the following year.
These events shaped the global economic landscape in 1993 and had lasting implications for the years to come.
"But what happened in 1993? ..."
There is an abrupt jump between 1992 and 1993 . The original census data is given by year and the four years 1989-1992 are (.431, .428, .428, .433) and the four years 1993-1996 are (.454, .456, ,450, .455). It seems extremely unlikely that the jump is real. In the census data year 1993 has footnote 23. Footnote 23 reads:
"Data collection method changed from paper and pencil to computer-assisted interviewing. In addition, the 1994 CPS ASEC was revised to allow for the coding of different income amounts on selected questionnaire items. Limits either increased or decreased in the following categories: earnings limits increased to $999,999; Social Security limits increased to $49,999; Supplemental Security Income and public assistance limits increased to $24,999; veterans' benefits limits increased to $99,999; child support and alimony limits decreased to $49,999."
Probably something about these changes explains the abrupt jump and the data for 1992 and before is not comparable to the data for 1993 and after. There have been other changes and it appears unwise to draw conclusions (about trends or otherwise) from it without carefully considering possible sources of error.
Stagnating median wage growth with all economic growth accruing to the top 1% of income earners after the imposition of Friedman political economy policies was expected to increase inequality in the US. What few expected was the appearance of a popular demagogue in response. Material well being, much higher than the recent past, was supposed to prevent this kind of resentment to oligarchy. Despite personal satisfaction, as measured by happiness studies, is not sufficient to overcome the resentment of the institutional distribution of economic surpluses to the wealthiest factions over decades.
"US now has the highest income inequality of any advanced economy in the world—by far."
Not sure, the by far part is correct.
The attached looks at the global GINI index, after taxes and transfers: after taxes and transfers is the closest to the lived experience.
The US is .380
The UK is .341
Portugal is .344
Spain is .338
So the US is higher/worst but the 'by far' , does not feel fair or accurate.
Note, is you limited the sample to say Scandinavian countries, then yes, the 'by far' statement is accurate.
https://www.pewresearch.org/short-reads/2013/12/19/global-inequality-how-the-u-s-compares/
Hey folks, Gini is not an acronym. It's named after Corrado Gini, a statistician.