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Reply #9: The 1% Ain't What It Used To Be [View All]

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xchrom Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Oct-20-11 06:12 AM
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9. The 1% Ain't What It Used To Be
http://www.theatlantic.com/business/archive/2011/10/the... /

Unsurprisingly, Occupy Wall Street have pushed income inequality to the center of the national conversation. Also unsurprising, I think, is the unspoken assumption that income inequality has continued to get worse since the crisis. After all, where are the bankers panhandling for change or standing in line at the food pantry?

But it would actually be quite surprising, if true. The massive, decades-long data set assembled by Piketty and Saez seems to show that income inequality falls during recessions, and particularly during prolonged crises. Crises destroy capital, and top incomes tend to be more tightly linked to capital than those of average workers. If you work for a wire factory that goes bankrupt, you may well have a rough year or two before you find another job, and your income may never fully recover. But if you own that factory, it will be years before you have an income even close to what you enjoyed before--and it's very possible that you'll never get there at all.

Note that this is not an argument about who suffers more during a recession; it is self-evident that a worker who loses a third of their $20,000 annual paycheck is much worse off than an owner who loses two thirds of their $500,000 annual draw. But the measured gap between their incomes will still shrink dramatically.

That's why I was surprised, two years ago, when census data seemed to show that income inequality had continued rising. However, I filed it under "maybe this time is different" and didn't really revisit the subject.






*****university of chicago :eyes:
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