Inequality is lower than what we are told by Sanders, Warren and the NDP

[Anonymous]

Now some economists have re-crunched the numbers and concluded that the income share of the top 1% in America may have been little changed since as long ago as 1960. They argue that earlier researchers mishandled the tax-return data that yield estimates of inequality. Previous results may also have failed to account for falling marriage rates among the poor, which divide income around more households—but not more people. And a bigger chunk of corporate profits may flow to middle-class people than previously realised, because they own shares through pension funds. In 1960 retirement accounts owned just 4% of American shares; by 2015 the figure was 50%.



The second wobbly pillar is the related claim that household incomes and wages have stagnated in the long term. Estimates of inflation-adjusted median-income growth in America in 1979-2014 range from a fall of 8% to an increase of 51%, and partisans tend to cherry-pick a figure that tells a convenient story. The huge variation reflects differences in how you treat inflation, government transfers and the definition of a household, but the lowest figures are hard to believe. If you argue that income has shrunk you also have to claim that four decades' worth of innovation in goods and services, from mobile phones and video streaming to cholesterol-lowering statins, have not improved middle-earners' lives. That is simply not credible.



Third is the notion that capital has triumphed over labour as ruthless businesses, owned by the rich, have exploited their workers, moved jobs offshore and automated factories. The claim that inequality is being driven by the rich accumulating capital was a central thesis of Thomas Piketty's book, "Capital in the Twenty-First Century", which in 2014 made him the first rock-star economist since Milton Friedman improbably filled auditoriums in the 1980s. Not all Mr Piketty's theories caught on among economists, but it is widely assumed that a falling share of the rich world's gdp has been going to workers and a rising share to investors. After a decade of soaring stock prices, this has some resonance with the public.



Recent research, however, suggests that the decline in labour's fortunes is explained in most rich countries by exorbitant returns to homeowners, not tycoons. Strip out housing and the earnings of the self-employed (which are hard to divide between capital and labour income), and in most countries labour shares have not fallen.



he last pillar is that inequalities of wealth—the assets people own, minus their liabilities—have been soaring. Again, this has always been harder to prove in Europe than America. In Denmark, one of the few places with detailed data, the wealth share of the top 1% has not risen for three decades. By contrast, few deny that the richest Americans have sprinted ahead. But even here, wealth is fiendishly difficult to estimate.



Not so rich pickings

The campaign of Elizabeth Warren, a Democratic presidential contender, reckons that the share of wealth owned by the richest 0.1% of Americans rose from 7% in 1978 to 22% in 2012. But a plausible recent estimate suggests that the rise is only half as big as this. (For connoisseurs, the difference rests on the factor by which you scale up investors' wealth from the capital income they report to the taxman.) This imprecision is a problem for politicians, including Ms Warren and Bernie Sanders, who want wealth taxes, since they may raise less revenue than they expect.



Britain's Labour Party, who favour the radical redistribution of income and wealth ought to be sure that inequality is as high as they think it is—especially when their policies bring knock-on costs such as deterring risk-taking and investment. By one estimate, Ms Warren's wealth tax would leave America's economy 2% smaller after a decade.



Until these debates are resolved, it would be better for policymakers to stick to more solid ground. The rich world's housing markets are starving young workers of cash and opportunity; more building is needed in the places that offer attractive jobs. America's economy needs a revolution in antitrust enforcement to reinvigorate competition. And regardless of trends in inequality, too many high-income workers, including doctors, lawyers and bankers, are protected from competition by needless regulation and licensing, and senseless restrictions on high-skilled immigration, both of which should be loosened.

https://www.economist.com/leaders/2019/11/28/inequality-could-be-lower-than-you-think?cid1=cust/ednew/n/bl/n/2019/11/28n/owned/n/n/nwl/n/n/NA/351303/n">https://www.economist.com/leaders/2019/ ... A/351303/n">https://www.economist.com/leaders/2019/11/28/inequality-could-be-lower-than-you-think?cid1=cust/ednew/n/bl/n/2019/11/28n/owned/n/n/nwl/n/n/NA/351303/n



I seldom find much accuracy in op-eds from The Economist, but even they can get it right on occasion.

[Anonymous]

There is a trend towards lower living standards for blue collar workers. But, I blame upper income urban liberals. They are the ones  demanding expensive useless power changes. They are the ones blocking natural resource development. They are the ones who think the sky will fall if we don't keep hiring unnecessary civil service workers and their pricey defined benefit pension plans.

[Anonymous]

What about political inequality? Look at all the money progs put into defeating Trump and the undoing the election results after he won the White House.

[Anonymous]

Now some economists have re-crunched the numbers and concluded that the income share of the top 1% in America may have been little changed since as long ago as 1960. They argue that earlier researchers mishandled the tax-return data that yield estimates of inequality. Previous results may also have failed to account for falling marriage rates among the poor, which divide income around more households—but not more people. And a bigger chunk of corporate profits may flow to middle-class people than previously realised, because they own shares through pension funds. In 1960 retirement accounts owned just 4% of American shares; by 2015 the figure was 50%.



The second wobbly pillar is the related claim that household incomes and wages have stagnated in the long term. Estimates of inflation-adjusted median-income growth in America in 1979-2014 range from a fall of 8% to an increase of 51%, and partisans tend to cherry-pick a figure that tells a convenient story. The huge variation reflects differences in how you treat inflation, government transfers and the definition of a household, but the lowest figures are hard to believe. If you argue that income has shrunk you also have to claim that four decades' worth of innovation in goods and services, from mobile phones and video streaming to cholesterol-lowering statins, have not improved middle-earners' lives. That is simply not credible.



Third is the notion that capital has triumphed over labour as ruthless businesses, owned by the rich, have exploited their workers, moved jobs offshore and automated factories. The claim that inequality is being driven by the rich accumulating capital was a central thesis of Thomas Piketty's book, "Capital in the Twenty-First Century", which in 2014 made him the first rock-star economist since Milton Friedman improbably filled auditoriums in the 1980s. Not all Mr Piketty's theories caught on among economists, but it is widely assumed that a falling share of the rich world's gdp has been going to workers and a rising share to investors. After a decade of soaring stock prices, this has some resonance with the public.



Recent research, however, suggests that the decline in labour's fortunes is explained in most rich countries by exorbitant returns to homeowners, not tycoons. Strip out housing and the earnings of the self-employed (which are hard to divide between capital and labour income), and in most countries labour shares have not fallen.



he last pillar is that inequalities of wealth—the assets people own, minus their liabilities—have been soaring. Again, this has always been harder to prove in Europe than America. In Denmark, one of the few places with detailed data, the wealth share of the top 1% has not risen for three decades. By contrast, few deny that the richest Americans have sprinted ahead. But even here, wealth is fiendishly difficult to estimate.



Not so rich pickings

The campaign of Elizabeth Warren, a Democratic presidential contender, reckons that the share of wealth owned by the richest 0.1% of Americans rose from 7% in 1978 to 22% in 2012. But a plausible recent estimate suggests that the rise is only half as big as this. (For connoisseurs, the difference rests on the factor by which you scale up investors' wealth from the capital income they report to the taxman.) This imprecision is a problem for politicians, including Ms Warren and Bernie Sanders, who want wealth taxes, since they may raise less revenue than they expect.



Britain's Labour Party, who favour the radical redistribution of income and wealth ought to be sure that inequality is as high as they think it is—especially when their policies bring knock-on costs such as deterring risk-taking and investment. By one estimate, Ms Warren's wealth tax would leave America's economy 2% smaller after a decade.



Until these debates are resolved, it would be better for policymakers to stick to more solid ground. The rich world's housing markets are starving young workers of cash and opportunity; more building is needed in the places that offer attractive jobs. America's economy needs a revolution in antitrust enforcement to reinvigorate competition. And regardless of trends in inequality, too many high-income workers, including doctors, lawyers and bankers, are protected from competition by needless regulation and licensing, and senseless restrictions on high-skilled immigration, both of which should be loosened.

https://www.economist.com/leaders/2019/11/28/inequality-could-be-lower-than-you-think?cid1=cust/ednew/n/bl/n/2019/11/28n/owned/n/n/nwl/n/n/NA/351303/n">https://www.economist.com/leaders/2019/ ... A/351303/n">https://www.economist.com/leaders/2019/11/28/inequality-could-be-lower-than-you-think?cid1=cust/ednew/n/bl/n/2019/11/28n/owned/n/n/nwl/n/n/NA/351303/n



I seldom find much accuracy in op-eds from The Economist, but even they can get it right on occasion.

Don't trust claims made by politicians.

[Anonymous]

I don't envy the wealth of some people.

[Anonymous]

Now some economists have re-crunched the numbers and concluded that the income share of the top 1% in America may have been little changed since as long ago as 1960. They argue that earlier researchers mishandled the tax-return data that yield estimates of inequality. Previous results may also have failed to account for falling marriage rates among the poor, which divide income around more households—but not more people. And a bigger chunk of corporate profits may flow to middle-class people than previously realised, because they own shares through pension funds. In 1960 retirement accounts owned just 4% of American shares; by 2015 the figure was 50%.



The second wobbly pillar is the related claim that household incomes and wages have stagnated in the long term. Estimates of inflation-adjusted median-income growth in America in 1979-2014 range from a fall of 8% to an increase of 51%, and partisans tend to cherry-pick a figure that tells a convenient story. The huge variation reflects differences in how you treat inflation, government transfers and the definition of a household, but the lowest figures are hard to believe. If you argue that income has shrunk you also have to claim that four decades' worth of innovation in goods and services, from mobile phones and video streaming to cholesterol-lowering statins, have not improved middle-earners' lives. That is simply not credible.



Third is the notion that capital has triumphed over labour as ruthless businesses, owned by the rich, have exploited their workers, moved jobs offshore and automated factories. The claim that inequality is being driven by the rich accumulating capital was a central thesis of Thomas Piketty's book, "Capital in the Twenty-First Century", which in 2014 made him the first rock-star economist since Milton Friedman improbably filled auditoriums in the 1980s. Not all Mr Piketty's theories caught on among economists, but it is widely assumed that a falling share of the rich world's gdp has been going to workers and a rising share to investors. After a decade of soaring stock prices, this has some resonance with the public.



Recent research, however, suggests that the decline in labour's fortunes is explained in most rich countries by exorbitant returns to homeowners, not tycoons. Strip out housing and the earnings of the self-employed (which are hard to divide between capital and labour income), and in most countries labour shares have not fallen.



he last pillar is that inequalities of wealth—the assets people own, minus their liabilities—have been soaring. Again, this has always been harder to prove in Europe than America. In Denmark, one of the few places with detailed data, the wealth share of the top 1% has not risen for three decades. By contrast, few deny that the richest Americans have sprinted ahead. But even here, wealth is fiendishly difficult to estimate.



Not so rich pickings

The campaign of Elizabeth Warren, a Democratic presidential contender, reckons that the share of wealth owned by the richest 0.1% of Americans rose from 7% in 1978 to 22% in 2012. But a plausible recent estimate suggests that the rise is only half as big as this. (For connoisseurs, the difference rests on the factor by which you scale up investors' wealth from the capital income they report to the taxman.) This imprecision is a problem for politicians, including Ms Warren and Bernie Sanders, who want wealth taxes, since they may raise less revenue than they expect.



Britain's Labour Party, who favour the radical redistribution of income and wealth ought to be sure that inequality is as high as they think it is—especially when their policies bring knock-on costs such as deterring risk-taking and investment. By one estimate, Ms Warren's wealth tax would leave America's economy 2% smaller after a decade.



Until these debates are resolved, it would be better for policymakers to stick to more solid ground. The rich world's housing markets are starving young workers of cash and opportunity; more building is needed in the places that offer attractive jobs. America's economy needs a revolution in antitrust enforcement to reinvigorate competition. And regardless of trends in inequality, too many high-income workers, including doctors, lawyers and bankers, are protected from competition by needless regulation and licensing, and senseless restrictions on high-skilled immigration, both of which should be loosened.

https://www.economist.com/leaders/2019/11/28/inequality-could-be-lower-than-you-think?cid1=cust/ednew/n/bl/n/2019/11/28n/owned/n/n/nwl/n/n/NA/351303/n">https://www.economist.com/leaders/2019/ ... A/351303/n">https://www.economist.com/leaders/2019/11/28/inequality-could-be-lower-than-you-think?cid1=cust/ednew/n/bl/n/2019/11/28n/owned/n/n/nwl/n/n/NA/351303/n



I seldom find much accuracy in op-eds from The Economist, but even they can get it right on occasion.

Don't trust claims made by politicians.

That is indisputable.