Posted by: Mark Gimein on October 26, 2011 at 4:00 AM
The Congressional Budget Office released its report on trends in household income Tuesday afternoon, concluding that (drumroll) since 1979 income has risen much faster at the top than lower down the distribution. Does this mean they definitely picked a side, as Business Insider puts it? I don’t think so. That’s not a side, it’s a fact. Nobody disputes that income has become more concentrated. The questions in the wealth debate are whether this is a problem and whether government should remedy it.
If you are still on the fence about this, one thing that might make it easier to decide is a sense not just of how income has shifted, but why. On this the report has largely taken the side of indecisiveness:
In all likelihood, the interaction of multiple factors has led to the growth in labor income inequality, and disentangling the contribution of those factors will remain a focus of research for some time.
Well, thank you. The CBO does make some conclusions about the stronger demand for for highly skilled workers. That’s probably accurate, but it does little to explain why income growth is concentrated at the very apex. You can see that easily in the chart above. Clearly skilled workers have done better than unskilled, but the pool of skilled workers has to go deeper than the top percentile. There are surely skills other than trading derivatives and programming at Google that are in demand.
If the CBO report doesn’t really explain the why of that chart (and really, it’s true that so far no one has), still the chart may help explain the political climate. A lot of the discussion now flows around the issue of whether those whose incomes haven’t risen should be angry. Look at the chart, though, and you notice that those at the bottom and middle have done just a bit worse than those right above them. They may not feel drastically poorer.
The people who can look around see the really wealthy pulling away are those in percentiles 81-99. They’re the folks who aspire to get to the very top. Over the last 30 years, that goal has moved further away, and they suspect that the upshot of any program of income distribution will move it still further. That’s the strongest anti-tax, small government constituency.