Question

while it’s generally agreed that income inequality has worsened over last 20-30 years, what does the data indicate about the stability over a period of time in the movement of Americans up and down the economic ladder. Explain how economists go about measuring “churning” in the distribution of income.

Answer 1

Answer:  Income inequality refers to the extent to which income is distributed in an uneven manner among a population. In the United States, income inequality, or the gap between the rich and everyone else, has been growing markedly, from past 30 years.

The years from the end of World War II into the 1970s were ones of substantial economic growth and broadly shared prosperity.

• Incomes grew rapidly and at roughly the same rate up and down the income ladder, roughly doubling in inflation-adjusted terms between the late 1940s and early 1970s.
• The income gap between those high up the income ladder and those on the middle and lower rungs — while substantial — did not change much during this period.

Beginning in the 1970s, economic growth slowed and the income gap widened.

• Income growth for households in the middle and lower parts of the distribution slowed sharply, while incomes at the top continued to grow strongly.
• The concentration of income at the very top of the distribution rose to levels last seen more than 80 years ago (during the “Roaring Twenties”).

• Wealth — the value of a household’s property and financial assets, minus the value of its debts — is much more highly concentrated than income. The best survey data show that the share of wealth held by the top 1 percent rose from just under 30 percent in 1989 to nearly 49 percent in 2016, while the share held by the bottom 90 percent fell from just over 33 percent to less than 23 percent over the same period.

The economists go about measuring “churning” in the distribution of income in america by finding that more unequal societies suffer from higher unemployment and reduced investment. A study linked households living in high-inequality areas with more financial distress, reflected by increased bankruptcy filings, higher divorce rates and longer commutes. Even as the gap between the incomes of the wealthiest and poorest U.S. families grew, poverty rates fell. New York City has the biggest rich-poor gap in the country, but its poverty rate is roughly half of Detroit's. China's income gap grew even as hundreds of millions of people were lifted out of poverty. The top 1 percent's share of income has fallen since 2005 in both Spain and Norway, as one struggled economically and the other prospered.