Friday, December 29, 2017

Inequality in the US and Europe

I have been saving the article from the New York Times that includes this graph, because it shows so clearly that America's rising inequality and stagnating middle-class incomes are not inevitable.

In 1980, Europe was a bit more unequal than the US. Then the US became steadily more unequal while inequality did not increase nearly as much in Europe.

Both the US and Europe face pressures from globalization, which drives down wages as their workers compete with much lower paid workers in the developing nations.

The United States reacted with a series of tax cuts for the rich, begun by Reagan in the 1980s and supported by Republicans ever since.  As a result, the top 1% doubled their share of national income since 1980, while the share of the bottom 50% declined dramatically.

By contrast, Europe generally kept higher taxes and more transfer payments.  As a result, the share of the top 1% increased much more slowly than in the US. And the share of the bottom 50% in Europe is as high now as it was in the US in 1980.

I recommend reading the complete article in the New York Times.