https://www.rand.org/content/dam/rand/pubs/working_papers/WR...
If you look at table C1b, to keep up with 118% GDP growth, you would have to be in the top 1%, in which case your income growth would've been 138.8%.
We can then see that redistribution of those extra 20% among the bottom 99% could not possibly turn a median of $50,000 into a median of $102,000.
In the paper I didn't find figures that I could use to reconstruct how much money would have to end up in someone else's hands to achieve the counterfactual, just that it's obvious that the 1% average going from $1,384,000 to $630,000 would represent a lot on its own. The other groups above the median would also have received less of a share. Also note that it may have happened that between 2007 and 2018 the 90-98%iles may have already received some of the money that used to accrue to the 99%ile, who knows why.
I think BI properly quoted the article, but there would be a lot of work to do to contextualize the whole thing. If growth were more shared, would there be more or less growth? That depends on whether the top 1% are actually creating GDP or whether they are just better at capturing the income from it. If there was a system in place that had paid the bottom 98% more, would there have been more inflation, eating away at real GDP growth? What does that big swing from 2007 to 2018 really mean for the 99%ile in C1b, not reflected in C1a?
Honestly, this paper raises more questions to me than it answers.
I am not leaving anything out, I am using the same table that the BI article used, the one with the $102,000 counterfactual representing "Full-Year, Full-Time, Prime-Aged Workers". The one you mentioned yourself.
If I were to instead use Table 2b, the median counterfactual would only be $57,000 and I would be making the same argument with different numbers.
> In the paper I didn't find figures that I could use to reconstruct how much money would have to end up in someone else's hands to achieve the counterfactual.
All the figures are there. Just take the delta for every percentile and add it all up. If the sum is negative, you can't achieve the counterfactual by income redistribution. (Spoiler: The sum is negative)
Why the huge disparity? It's because the GDP and income are only loosely related. The US has collectively been spending more than it earned for decades, and all that spending goes into the GDP.
> I think BI properly quoted the article, but there would be a lot of work to do to contextualize the whole thing.
They may have "properly quoted" the article, but they came to a wrong conclusion that feeds into the popular "the rich are taking all our money" narrative.
I guess we'll have to agree to disagree. I don't find the paper very informative, but I find the BI article to be an accurate representation of what the author is trying to say.
Again, you could use table 2a, which specifies the top 1%. You would have to come to the same conclusion, if you do the math.
Of course the top 1% did disproportionately grow their income relative to GDP growth, it's just not enough to redistribute to make everyone else fall in line with GDP growth. Not even close.
> And, in any event, none of these graphs are really representing the size of each slice of the pie for a group of people, they're just looking at the income at that level.
The tables give you all the information you need to infer the slice of the pie. Just add up all the incomes for every percentile and you have the size of the pie, add up the incomes for a percentile group and you have the size of the slice.
For table 2a, the size of the pie is $8,529,000. The bottom 25% earn $375,000, or less than 5% of that. The top 1% on the other hand earn 13% of it. I'm not questioning the existence of income inequality. That's not the point.
The point is that this income inequality is not the reason for why GDP growth is so detached from income growth. Incomes didn't grow in tandem with GDP for almost every income group. For those income groups that did surpass GDP growth, it didn't surpass by the amount necessary to make up for lack of growth for everyone else. Yet, this is the conclusion that the BI insider wants to draw. The paper doesn't draw this conclusion, probably because it is obviously wrong.
> I don't find the paper very informative, but I find the BI article to be an accurate representation of what the author is trying to say.
It's a misrepresentation. Do the math!
The conventional measure for this is "percentage of GDP distributed as wages". This number has mostly dropped for the last 35-40 years, whereas its corollary - "percentage of GDP not distributed as wages" has grown. This is the largest single contributor to current income and wealth inequality.
However, that's about as far as the relation goes. Technological improvement can both reduce the demand for labor and increase GDP. If there is no reason for demand for labor to increase, wages won't rise.
The narrative that a small percentage of people is earning so much and therefore everyone else must earn far less is popular, but mostly wrong. I gave you the source that says perfect income redistribution would cause only a wage increase of less than 20% to the current median. That's the real impact of income inequality, it's not more than 100% like this article would like you to believe.
That's a political statement, not a law of nature. Bundled up in there are a large number of assumptions about how an economy works, how taxation works, what the purpose of a society (or even just technological advancement) really is.
I appreciate that for a lot (most?) people in the USA today, your beliefs about this are the common ones, and they seem self-evident and obviously true. But they are just one choice among many.
If you can't appreciate the difference that every single full time worker making $72k/year would make over the current situation (median of $62k/yr, up dramatically from just a couple of years ago when it was $53k), then I don't think I can help you. Moving the mean of a distribution to "less than 20% higher" than the median is huge!
That's the way it works in our system, which finds wages through supply and demand, which is a law of nature. You may nitpick and find a couple of salaries or other types of income that are not priced in this way, but it is generally true for the average person.
Whether that system is the best system is indeed a political question, but that's besides the point.
> Moving the mean of a distribution to "less than 20% higher" than the median is huge!
Perhaps, but it's nowhere near the 100% change that the article promises.
Is this 8th grade economics? Consider a nation that has strong tariffs on imported goods. Consider another nation that has major obstacles to the investment of foreign capital, and lots of cheap labor. Now consider a political campaign (it doesn't look a campaign, but it is) to remove the tariffs and allow capital to move freely from the first nation to the second.
Result: dramatic changes in the first nation's wages, at least for work that gets moved to the second country.
Remind me again which law(s) of nature is involved here.
In your example, labor supply for the first country has effectively increased while demand has not. In effect, wages must fall in that country.
However, there is now increased demand on that cheaper labor, so those wages must rise, given a limited supply.
Actual labour share of the actual money being made seems to be pretty hard to measure accurately, from what I can tell.
You weren't actually claiming that the overseas labor got the same chunk in wages that used to go to US labor, were you?
That has nothing to do with income inequality. GDP itself is a problematic figure, but its relation to income is rather loose.
If everybody earned the mean income, that would be perfect income equality. For the US, mean household income is around $72,000, whereas median household income is around $62,000.
https://en.wikipedia.org/wiki/Household_income_in_the_United...