The big economic question of the day should be asking how we've managed to keep wages at only the "stagnation" level rather than precipitously falling in the face of so much downward pressure.
If you were happy with the income equality from a century ago, I'm willing to adopt the welfare and tax systems of that time so all the incentives are the same.
1. Demand is not perfectly elastic
2. Demand is perfectly elastic, but supply was increased more on the lower end of the income range which reshapes the income distribution.
3. Trade policy reduced demand in the middle of the income range.
Let's say we've got a feudal society with dumb nobility that rules over a smart peasantry by force. If that society becomes free, we'll expect smart peasants to move up and dumb noblemen to move down across the first few generations... but once they've moved, they've moved. Ergo, declining social mobility.
There's an extreme amount of assumption baked into that.
1. Genetics is the only factor that determines merit for wealth?
2. Genetics merits extreme differences in income/wealth?
2. We're talking about social mobility, not the level of inequality.
1) One does not have to be intelligent to be wealthy.
2) Those born wealthy do not have to be intelligent to remain wealthy - they just need not be a consumeristic imbecile.
3) Genetics has such a small impact, if any, on social mobility - quite the opposite. If I am born a Kennedy I am more likely to never fall below my birthright social class because of my family lineage.
4) You contradict yourself. You say the nobility rules by force, then immediately follow that with "If that society becomes free" - how exactly would that society magically free?
2. 70% of rich families lose their wealth by the second generation, 90% by the third. [A]
3. IQ is a greater predictor of income than parental SES. Someone in the 95th percentile for IQ has a higher EV for earnings than someone born into the 95th percentile for wealth.
4. A number of revolutions have happened. If you don't believe that modern France or Japan are freer than their feudal predecessors then I agree that we are probably not on the same page.
I've seen the statistic quoted in so many places, yet have never found a link to the actually study. No info on sample size; we don't even have a definition of 'wealth' used in the study.
[1] https://www.wsj.com/articles/SB10001424127887324662404578334...
http://www.businessinsider.com/social-mobility-is-on-the-dec...
Second, I think it's still a problem if the income of 90-98% of the country stagnates for decades, while the top earners get higher and higher income. Of course that affects inequality.
I'm also not sure it matters that much if the players at the top switch around if they have increasingly larger leverage on society.
For instance, we're seeing CEOs get rewarded larger and larger amounts of money every year, even if the companies lose money, like in this absurd case:
https://techcrunch.com/2018/02/22/snap-ceo-evan-spiegel-got-...
Where's that money coming from? The employees' potential salary increases? The retail investors' money? It seems to me that the rich keep siphoning off money from everyone else, and that's not sustainable.
They also get larger and larger amounts of money even when they get kicked out of the company for failing. This doesn't make sense to me at all. And I think the excuse that they need such amounts of money or otherwise they wouldn't take the job or something is utter BS. I'd more likely believe the board is giving them the money so the CEO doesn't sue the company, or better yet because the CEO was the one writing their checks before that, or something along those lines.
And this is just the corporate world. The US Congress seems to get crazier every year and listening more and more to corporations and their interests, and less and less to the people and solving real problems in the country (healthcare, infrastructure, etc).
It's like the whole American society is on the brink of collapse, and everyone just doesn't know it yet. Eventually, people will "suddenly" start to violently riot because of all this stuff added together, and it won't be pretty.