What’s wrong with this picture?

“We don’t believe in laws like the law of large numbers.” —Apple CEO Tim Cook

The red line in the chart above, writes Timesman David Leonhardt in Our Broken Economy, in One Simple Chart, “captures the rise in inequality better than any other chart or simple summary that I’ve seen.”

I don’t have a neat point to make about the soaring red line and Apple’s growth trajectory. Or about income inequality and the law of LOL numbers. All I know is that something is broken.

6 Comments

  1. David Emery said:

    Now it would be interesting to see a plot of this over time, not just cherry-picking 2 years. After all, if you picked 1932, you’d see something very different than you’d see in 1928 or 1998.

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    August 8, 2017
  2. Gianfranco Pedron said:

    I think the middle class has been able to live relatively well with little income growth because of the (relative) stabilization if not reduction of prices for commodities and moderate luxuries offered by offshore sourcing for many of those items.

    If we had not outsourced our manufacturing, the poor and the middle class would be way worse off than they are without significant increases in their income. Increases in income per unit of output means that the value of any savings one might have in liquidities, which I would guess is the predominant savings vehicle for the poor and middle class if there are any savings, gets devalued accordingly.

    I’m not sure that the cost of “making America great again”, a great campaign slogan, has been given much consideration by the people it will affect the most.

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    August 8, 2017
  3. Robert McDonald said:

    Yes, the picture is very complicated. And all these observations are accurate. One of the biggest issue in solving the inequality problem is that most Republican leaders either do not understand the bigger picture or are in denial about the many factors that have been at work in disenfranchising many of our citizens. Its not the minimum wage “stupid,” its the fact that over 30% or American workers now have no benefits . No holiday pay, no sick leave, no medical and dental insurance and no retirement 401K. Many will pay for their health expenses by forced bankruptcy leaving them without viable credit which also has serious costs in addition to higher interest charges. And on on top of all reductions in compensation that have occurred since the 1990’s, there is job insecurity as well. All the items on this page have resulted in a severe degradation in compensation paid for work performed over the last 30 years or so.

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    August 8, 2017
  4. Ken Cheng said:

    If I’m reading this graphic correctly,I have no issues that the ultra-rich, over 99th %ile, are seeing income growth rates of 2 to 6%. And it seems to me that the ideal income growth lines should be level or slope upwards slightly. 2014 does this better than 1980.

    However, the biggest disappointment to me is that 2014 income %ile groups below 50th, seem to show <1% real income growth, not to mention that income %ile groups below 5th, seem to show negative real income growth. That should be unacceptable in the richest nation on this Earth.

    I don't think the answer is the 1980 income growth line shape, but rather should be raising the 2014 income growth line shape, so that it's at least a couple percent higher. How to get there from here is what I'd like to hear about from politicians who want to get elected. The answer shouldn't just be shifting income from the wealthiest to the poorest, although some of that might help, but how to lift the whole curve. I imagine that is what China's income growth curve looks like, but with a far steeper slope.

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    August 8, 2017
  5. Reader Alex Bowden writes from over the transom:

    What’s wrong with this picture?

    “The red line in the chart above captures the rise in inequality better than any other chart or simple summary that I’ve seen.”

    Err…. No, it doesn’t. The author confuses cause, with effect.

    If the income percentiles were based on peoples income 34 years ago, and the income growth was “over following 34 years”, then that would be true.

    But this is income percentiles now, and income growth over the previous 34 years.

    So, what the curve actually show is that the people who have the highest incomes now, are the ones whose income has grown the most over the last 34 years.

    Which shouldn’t be a surprise to anyone.

    It’s not about inequality. It’s about simple mathematics.

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    August 9, 2017
    • David Emery said:

      “grown most over the last 34 years”
      Not really, because as I wrote earlier, these are snapshots in time, and not an actual plot over the 34 year period.

      I’m not questioning the underlying position, I’m just saying that the two data points aren’t sufficient to draw that conclusion.

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      August 9, 2017

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