Why Is Inequality Increasing? (view full screen)

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This presentation is the beginning of an analysis of roots of increasing inequality. It is an introduction to a method of creating new measures of economic health that better reflect "main street" realities. Current Link (2012) reinforcing data presented in this presentation: http://mobile.bloomberg.com/news/2012-11-29/why-conservatives-must-surrender-on-redistribution-.html

The proposed new measures are leading indicators designed to guide thinking on the development of solutions that foster growth via expansion, vs. growth via concentration of wealth.

The underlying point of view promoted via the presentation: all "growth strategies" are not equal.

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Why Is Inequality Increasing? (view full screen)

  1. 1. content courtesy of www.frondebaliste.org data census.gov Inequality is Increasing: Do We Know Why? A Need for New Measures of Economy? The watermark is an illustration of Gini (fed inequality measure) trend by presidential term Copyright © .r. jenkins 2009 - 2010 , fronde baliste, all rights reserved, please site source when reproducing any portion of this slide
  2. 2. content courtesy of www.frondebaliste.org data from national exit polls Definitions and Questions: • Is income properly defined? • How do wages and income differ? • Does growth always produce inequality? Copyright © rhesa jenkins 2009 - 2010 , fronde baliste, all rights reserved, please site source when reproducing any portion of this slide
  3. 3. Why is inequality increasing? • The presentation paints a picture of continuing increase in inequality • As a starting point, inequality is defined in terms of disparity in income growth • Trend charts are presented comparing Income vs. Wage growth. This is first in a series of comparisons examining origins of increase in inequality. • The purpose of the presentation is to highlight metrics that reveal root cause relationships, the understanding of which can guide development of solutions. Inequalities - Comparison of Income Growth: before and after 1980 1980 Inequalities - Comparison of Income Growth: before and after Increasing $200,000 $200,000 Inequality? $180,000 $180,000 Split screen of: $160,000 $160,000 • Pre circa 1980 $140,000 $140,000 income stratification $120,000 $120,000 • Post circa 1980 $100,000 $100,000 income stratification. Growth Ratio Growth Ratio Growth Ratio Growth Ratio $80,000 $80,000 Top vs. Lowest Lowest Top vs. EVEN EVEN Top vs. Lowest Lowest 400% Top vs. 400% • Income stratification $60,000 $60,000 itself has many $40,000 $40,000 causes. The focus of $20,000 $20,000 the presentation is $0 $0 on increasing inequality, not simply 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 stratification Lowest Lowest 20% 20% Middle 20% 20% 20% 20% Middle Top Top Copyright © .r. jenkins 2009 - 2010 , fronde baliste, all rights reserved, please site source when reproducing any portion of this slide
  4. 4. Charts based on Census Data – Income Surveys • Income growth reported in census data is based on annual reports by household • Data is reported by quintile (5 earnings groups from highest to lowest 20%) • Before 1980 growth in income for low and middle 20% households was above or equal to growth for high income households • Mid 20% growth rate per annum: 1.9% • Top 20% growth rate per annum: 1.4% Income Growth Trends • Chart illustrates income growth from 1967 to 1981 for low – middle (16%), and top income (14%) groups. Growth rates are virtually even. • If this trend continued, inequality would have decreased over time. Copyright © .r. jenkins 2009 - 2010 , fronde baliste, all rights reserved, please site source when reproducing any portion of this slide
  5. 5. Charts based on Census Data – Income Surveys • After 1980, income growth for low income and middle income groups stalls and flattens at a rate less than pre-1980 growth rates. • After 1980 growth for the top income group is steep and sustained (Reagan Tax Reforms?) • Mid 20% annual growth rate: .03% • Top 20% annual growth rate: 1.3% Origins of Wealth Gap? • Chart illustrates income growth from 1982 to 2008 for low – middle (13 %) and top (46 %) income groups • Disparity in growth in income for low- mid vs. top income groups grew to nearly 400% • Summary: 1967 to 2008 income growth for the top group was sustained. Income growth for the mid group decreased from1.9% per year pre 1980, to essentially non-existent post 1980 Copyright © .r. jenkins 2009 - 2010 , fronde baliste, all rights reserved, please site source when reproducing any portion of this slide
  6. 6. Charts based on Census Data – Income Surveys • The chart shows impact if income growth rates are equalized after 1980. Top tier: low tier multiplier measure of inequality is cut in half. • Impact of equalizing growth rates on multiplier as a measure of inequality: • Current Multiplier 15x • Adjusted Multiplier 8x Equalizing Income Growth Trends • Chart illustrates the impact if low tier income growth rates, from 1981 to 2008, are adjusted to equal growth rates of the top tier income over the same period. • If mid – low income growth matched top group growth after 1980, current day mid-low income would be 82% higher than reported 2008 levels • Reported low income $11K/yr : Adjusted to top tier growth: $21K/yr Copyright © .r. jenkins 2009 - 2010 , fronde baliste, all rights reserved, please site source when reproducing any portion of this slide
  7. 7. Increasing Inequality – Root Cause: Part One - Wage growth stalling? • The following slides illustrate a shift when comparing overall wage rate trends to top tier and mid tier income growth. This shift in relationship begins circa 1980. • This initial focus on wage begins an examination of root causes of increasing inequality. Wages vs. Income Split screen: compares: • Pre circa 1980 income vs. wage growth • Post circa 1980 income vs. wage growth. • The chart reveals a change in relationship between wages and income for the top income group. • Mid income basically tracks wage growth, while top income shifts staying Copyright © .r. jenkins 2009 - 2010 , fronde baliste, all rights reserved, please site source when reproducing any portion of this higher. consistently slide
  8. 8. Charts based on Census Data – Income Surveys Inequalities - Wage Growth vs.Top Tier Income Growth pre 1980 • The chart focuses on Top 20% income group to 40% highlight the shift in relationship between top 35% tier income and wage. 30% • This shift is illustrated in 25% the next slide. 20% • Pre 1980, income growth 15% for the Mid 20% group averaged 5% more than 1968 10% Top 20%, tracking wage 1969 1970 1971 trends. (Nixon Affirmative 1972 5% 1973 Action Reforms?) 1974 1975 1976 0% 1977 1978 Wages Top Income 1979 1980 Shift in Wage vs. Income Growth? • Chart compares overall Wage trends to Top 20% Income growth from 1967 - 1980. • Wage rate growth during this period: 34% : Top Tier income growth for this period: 15% • Pre 1980, wage rates increased faster than top tier Income, an indication of success of policies aimed at protecting & diversifying the workforce? Copyright © .r. jenkins 2009 - 2010 , fronde baliste, all rights reserved, please site source when reproducing any portion of this slide
  9. 9. Charts based on Census Data – Income Surveys • The period sees a dramatic shift in in which growth in top tier income outstrips wage growth. • The gap persists, and widens. • The trend for mid income is opposite. The highest cumulative growth for mid tier occurs 1999 to 2001 at 34% (Clinton Jobs Reforms?) • This shift is indication of higher wage growth rates for high wage earners, as well as increase in passive Shift in Wage vs. Income Growth? income as a component of • Post 1980 (1981 -2008) Top 20% Income growth caught up with, income. top tier then exceeded growth in Wages, i.e., reversing trend the blue bars began peaking above Have purple Relevant Article: “We the To Tolerate Inequality” bars.. • Wage rate growth remains: 34% - Top Tier income growth increases to 45% • At the same time, Mid 20% income growth falls behind - lags wage rate growth. (not pictured) Copyright © .r. jenkins 2009 - 2010 , fronde baliste, all rights reserved, please site source when reproducing any portion of this slide
  10. 10. Why is Inequality Increasing: Symptom • Increasing difference in growth trends of income groups income Cause • Top 20% Income disconnects from – grows faster than – overall wage rate Effect • Continually increasing inequality wage Solution • „Work In Progress….Targeted Stimulus” Relevant Research: http://tinyurl.com/GiniEffect http://tinyurl.com/LarryMishel-Inequality rising inequality Copyright © .r. jenkins 2009 - 2010 , fronde baliste, all rights reserved, please site source when reproducing any portion of this slide
  11. 11. content courtesy of www.frondebaliste.org data from national exit polls End Notes: Dimensions in the data; questions on measures1: • How are Productivity and Wage related? 1. Subsequent presentations will examine trends in wage and productivity. Each analysis examines variation in rates of change vs. comparison of absolute values. This “systems thinking” approach is employed in hopes of magnifying signals in the data to illustrate the impact of economic policy decisions on rates of change. The approach will help highlight what has worked, and what has not. Related Research: a: http://www.talkleft.com/story/2010/3/23/112549/754 b: http://www.stanford.edu/group/scspi/media_magazines.html Copyright © .r. jenkins 2009 - 2010 , fronde baliste, all rights reserved, please site source when reproducing any portion of this slide
  12. 12. The next presentation in this series…. Copyright © .r. jenkins 2009 - 2010 , fronde baliste, all rights reserved, please site source when reproducing any portion of this slide
  13. 13. Inequality is Increasing: Do We Know Why? A Need for New Measures of Economy? Part Two Wage and Productivity Related Research: :http://tinyurl.com/New-York-Times-Wages Copyright © .r. jenkins 2009 - 2010 , fronde baliste, all rights reserved, please site source when reproducing any portion of this slide
  14. 14. Copyright © .r. jenkins 2009 - 2010 , fronde baliste, all rights reserved, please site source when reproducing any portion of this slide

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