When the issue of inequality is discussed, those who wish to deny that it exists, and has been growing, claim that increased benefits such as health care insurance are not accounted for by measuring income. Lane Kenworthy addresses this (via Tyler Cowen).
One objection is that the price deflator typically used to adjust GDP per capita for inflation differs from the deflator used for median family income. I’ve addressed that here by using the same deflator for both.
A second concern has to do with GDP per capita as an indicator of economic advance. Since the 1970s a larger portion of GDP has gone to replace old capital equipment and therefore can’t go to household income. Also, the number of persons has increased less rapidly than the number of households, so a per capita (per person) measure of GDP could mislead.
A third worry is that the income measure used to calculate median family income is too thin. If a growing portion of GDP has gone to employer benefits, that would help middle-class households, but it wouldn’t show up in these income data.
To address these second and third concerns, we can turn to a more encompassing measure of household income. The data are from the Congressional Budget Office (CBO). The measure includes all sources of cash income. It adds in-kind income (employer-paid health insurance premiums, food stamps, Medicare and Medicaid benefits), employee contributions to 401(k) retirement plans, and employer-paid payroll taxes. Tax payments are subtracted.
This leads, of course, to the chart of the day.
As has been noted before, something happened around 1980. Since then we have seen our debt rise and inequality take off.
Probably some policy implemented during the Carter administration. Maybe it was the Depository Institutions and Monetary Control Act (DIDMCA) of 1980.
“increased benefits such as health care insurance are not accounted for by measuring income. “–umm, excuse me? Fewer jobs come with health insurance today than ever before–16.7% of the US workforce as of last year. These figures often get fudged by counting full-time workers only, when employers get to make all the decisions as to (a) what constitutes full-time for purposes of benefits, and (b) who is hired to work full-time by that definition, whatever it is. The number of workers holding two or more part-time jobs (none of which are likely to come with health insurance) is a pretty good indicator of these issues.
“Also, the number of persons has increased less rapidly than the number of households, so a per capita (per person) measure of GDP could mislead.”
In other words, the households were getting smaller and smaller. So, why is this graph comparing per capita GDP and median household income? Why compare apples and oranges?
Anyway, who ever denied that there was inequality in US? People are different, so inequality is unavoidable.
“Equality” is such an unpopular word that it may not be best to talk of “inequality,” given that the vast majority of Americans appear to adhere to the standard, “Given that free people are not equal, equality is always and everywhere the enemy of freedom.”
While a “better distribution” of income and workers garnering a larger share of the “productivity proceeds” that’ve come from America being “the most over-worked country in the developed world, couching that in terms of “equality/inequality” doesn’t advance the argument much, if at all.
MOST people clearly see that a janitor is very much “unequal” in skill sets to the stock broker or the attorney, and SHOULD BE very “unequal” in his earning power as well. STILL, some of the productivity bonus this country has enjoyed SHOULD go to the workers at all levels.