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