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Income inequality: poverty falling faster than ever but the 1% are racing ahead


How are the benefits of economic growth shared across society? Much of the current discussion assumes that income inequality is rising, painting a gloomy picture of the rich getting richer while the rest of the world lags further and further behind. But is it really all bad news?

The reality is complex, yet by looking at recent empirical data we can get a comprehensive picture of what is happening to the rich and the poor.

Let us start with the share of total income going to that much-maligned 1%. Reconstructed from income tax records, this measure gives us the advantage of more than a century of data from which to observe changes.

The blue line in the left-hand panel below shows the long-term trend in the US. Prior to the second world war, up to 18% of all income received by Americans went to the richest 1%. The share of the top 1% then dropped substantially, increasing again in the early 1980s until it returned to its 1939 level.

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