More charts showing the rich are still getting richer....again!

I've seen this story making its rounds through The New York Times, Kevin Drum, Vox, and Daily Kos. The source story is through Vox, where Bard College economist Pavlina R. Tcherneva created a chart that vividly shows the distribution of income gains during economic expansion periods have increasingly gone to the rich.  First, the chart:

And here is the Vox story:

Pavlina Tcherneva's chart showing the distribution of income gains during periods of economic expansion is burning up the economics internet over the past 24 hours and for good reason. The trend it depicts is shocking:

For a long time, most of the gains from economic growth went to the bottom 90 percent of the income distribution. And, after all, the bottom 90 percent includes the vast majority of people. Since 1980, that hasn't been the case. And for the first several years of the current expansion, the bottom 90 percent saw inflation-adjusted incomes continue to fall.

The data series ends in 2012 and we don't know how long the expansion will last, so that negative income trend may evaporate before all is said and done. But unless there's a massive break with the previous three expansions we will continue to have an economy where the typical family's living standards grow much more slowly than GDP growth per se would allow.

A couple of thoughts first.  First, the distribution trend of the income gains was both falling for the bottom 80 percent and rising for the top 10 percent throughout the entire chart.  In the 1949-53 expansion, the bottom 90 percent received 80 percent of the income gains, while the top 10 percent received 20 percent of the gains.  Through the 1950s to 1970s, the bottom 90 percent saw their income gains erode on a slow basis, with the top 10 percent receiving a slow increase.  I'm guessing the slow change of income gains from the 1950s through 70s could be due to a number of changes in the U.S. economy.  The first may have been the gradual reduction of income and capitol gains tax rates to the upper 10 percent, allowing them to get a larger piece of the pie.  A second potential change may have been the off-shoring of high-paying American manufacturing jobs during the 1970s--there is a good size drop between the 1961-69 bar and 1970-73 bar.  The inflation of the 1970s may have also taken its toll on American wage earners, where prices were increasing faster than wages.

The real shocker of this chart is 1982-90, which was the start of President Reagan's supply-sided economics.  Income gains for the top 10 percent almost doubled, dramatically overtaking the bottom 90 percent, and never looked back.  What happened here?  Again, I would guess it was a combination of President Reagan's tax cuts to the rich, the massive slashing of capital gains slashing, and the complete decimation of the unions--especially with Reagan's firing of the unionized air traffic controllers, and replacing them with scabs.  High paying American manufacturing jobs that were lost in the 1970s were replaced with minimum wage service sector jobs, further reducing income gains for the bottom 90 percent.  I'd further guess that the off-shoring of American jobs went further from manufacturing to back-office support jobs in the 1980s, and even now to the higher technology jobs of the 1990s and 2000 decades.  The bottom 90 percent of Americans earn their money through wages and salaries, where wages have remained stagnant since at least the 1980s--they are not getting the income gains for the past 30 years, as corporations have resisted increasing wages for American workers, decimated the unions through union-busting strategies, and have out-sourced jobs to lower wage countries such as China or India, or have forced Americans to take contracting and staffing jobs with low pay and no benefits instead of becoming regular employees.  The top 10 percent make their money not through wages and salaries, but rather through investment income through stocks, bonds, real estate income, hedge funds, and such.  Their investment and income gains just continues to grow and grow.

It gets worst.

This is from the New York Times Neil Irwin, who sifts through the numbers:

Fast-forward to the 1990s and early 2000s expansions, and a new pattern emerged, with the huge majority of income gains going to the top 10 percent, leaving pocket change for everybody else. From 2001 to 2007, 98 percent of income gains accrued to the top 10 percent of earners, Ms. Tcherneva found, basing her analysis on data from Thomas Piketty and Emmanuel Saez, the academics who have made a speciality in documenting the rise of income inequality around the world. (As a point of reference, an American needed a 2011 adjusted gross income of $120,136 to be in the top 10 percent of earners that year, according to I.R.S. data.)

Which brings us to the current expansion. Ms. Tcherneva’s data goes only through 2012, so perhaps in the two years since then things have gotten a bit better for most workers. But in the first three years of the current expansion, incomes actually fell for the bottom 90 percent of earners, even as they rose nicely for the top 10 percent. The result: The top 10 percent captured an impossible-seeming 116 percent of income gains during that span.

But one consistent finding of research into inequality is that merely cutting things off at the top 5 or 10 percent of earners doesn’t capture all of what is changing in patterns of wealth and earnings. So Ms. Tcherneva also compiled the same data for those in the top 1 percent. (The cutoff there, according to the I.R.S., is $388,905 in 2011 adjusted gross income).

This pattern is, in its way, all the more striking. One percent of the population, in the first three years of the current expansion, took home 95 percent of the income gains.

One percent of the population, in the first three years of the current economic expansion, took home 95 percent of the income gains.

Continuing with Neil Irwin's story:

 Ms. Tcherneva argues that this shift indicates a failure of the approach that governments take to stabilizing the economy. The postwar consensus has been that central bank action to cut interest rates should be the key tool to fight economic slumps, and to the degree fiscal policy ought be used at all, it should be tax and spending policies that boost the economy in the aggregate, such as cutting taxes temporarily.

She argues that this approach isn’t flowing through to broad-based wage gains because it is so untargeted. “Conventional fiscal fine-tuning measures ensure that when government increases its total demand for goods and services, it first improves the conditions of the skilled, employable, highly educated, and relatively highly-paid wage and salary workers,” she wrote. “It is hoped that after those workers increase their own demand for products and services, the fiscal stimulus would trickle down to the less skilled and low-wage workers.”

But, she added, “this trickle-down mechanism never quite trickles down far enough to create job opportunities for all individuals willing and able to work.”

In other words, supply-sided economics has failed--again!  We have had 30-plus years of trickle-down, supply-sided economic policy taking place in the U.S.  This has resulted in an ever-increasing inequality taking place between the upper 10 percent--and now especially the upper one-percent--over everyone else.  As the one-percenters take an even greater share of the economic gains, they will have even more money to spend in accumulating political power and control to shape government economic policy to their advantage.  They have the money to spend in lobbying congressmen and presidents to continue this supply-sided economic policy that has benefited them so well.

And the one-percenters will not change.