Everything you need to know about income inequality

16 Cards

CURATED BY Matthew Yglesias

2014-05-07 13:15:40 -0400

  1. What is income inequality?
  2. How do you measure inequality?
  3. What is a gini coefficient?
  4. Is inequality bad?
  5. How economically unequal is the United States?
  6. Is inequality rising because the rich are getting richer or because the poor are getting poorer?
  7. Why is inequality rising?
  8. How does inequality relate to opportunity and upward mobility?
  9. What can the government do to reduce inequality?
  10. How does income inequality relate to wealth inequality?
  11. What's happening to inequality elsewhere in the world?
  12. What's happening to global income inequality?
  13. Why do some economists say the increase in inequality has been overstated?
  14. Where can I learn more about inequality?
  15. You didn't answer my question!
  16. How have these cards changed?
  1. Card 1 of 16

    What is income inequality?

  2. Card 2 of 16

    How do you measure inequality?

  3. Card 3 of 16

    What is a gini coefficient?

  4. Card 4 of 16

    Is inequality bad?

  5. Card 5 of 16

    How economically unequal is the United States?

  6. Card 6 of 16

    Is inequality rising because the rich are getting richer or because the poor are getting poorer?

  7. Card 7 of 16

    Why is inequality rising?

    There is some disagreement about this and also some nuance as to exactly which aspect of inequality we're talking about and what kind. Some of the most prominent accounts:

    • Skill-biased technological change. Technological improvements raise incomes, but they do so unevenly. Rewards disproportionately go to highly educated workers. On this view, rising inequality reflects slowing educational progress and better schooling is the key solution. This has been the traditionally dominant view in economics, but it doesn't explain the specific rise of the top 1 percent very well.
    • Immigration. Importing low-skilled workers to do low-paid jobs tends to raise measured income inequality. David Card estimates immigration to be the cause of about 5 percent of the total rise in inequality.
    • Decline of labor unions. Labor unions reduce inequality both by raising wages at the low end and constraining them at the high end. Bruce Western and Jake Rosenfeld estimate that the decline of labor unions as a force in the American economy is responsible for 20 to 33 percent of the overall rise in inequality.
    • Trade. Growing international trade with lower-wage countries such as China seems to have reduced the wage share of overall national income, boosting the incomes of people with large stock holdings.
    • Superstar effects. Because the world is bigger and richer in 2014 than it was in 1964, being a "star" performer — the most popular athlete, author, or singer — is more lucrative than it used to be.
    • Executives and Wall Street. Increased incomes for CEOs and financial sector professionals account for 58 percent of the top 1 percent of the income distribution and 67 percent of the top 0.1 percent. So the specific dynamics of compensation in those areas are wielding a big influence.
    • Minimum wage. David Autor, Alan Manning, and Christopher Smith find that about a third (or possibly as much as half) of the growth in inequality between the median and the bottom ten percent is due to the declining real value of the minimum wage. This is different from the issues about the top end pulling away that normally dominate political discussions of inequality, but it's a noteworthy finding nonetheless.
    • The fundamental nature of capitalism. Thomas Piketty has made waves lately with his new book Capital in the 21st Century, which argues that very high levels of inequality are the natural state of market economies. In his view, it's the economic equality of the mid-twentieth century that needs explaining, not today's inequality.
  8. Card 8 of 16

    How does inequality relate to opportunity and upward mobility?

  9. Card 9 of 16

    What can the government do to reduce inequality?

  10. Card 10 of 16

    How does income inequality relate to wealth inequality?

  11. Card 11 of 16

    What's happening to inequality elsewhere in the world?

  12. Card 12 of 16

    What's happening to global income inequality?

  13. Card 13 of 16

    Why do some economists say the increase in inequality has been overstated?

  14. Card 14 of 16

    Where can I learn more about inequality?

  15. Card 15 of 16

    You didn't answer my question!

  16. Card 16 of 16

    How have these cards changed?

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