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Unshared income gains evident in data presented at conference

Above these words is a figure that is interesting and meaningful to many macroeconomists. It also happens to be from the conference session in honor of Middlebury economist Bob Prasch, who is among those who passed away last year. It is provided by the presenter, David Howell, an economist with the New School for Social Research in New York City. Here we have evidence that reflects a sharp rise in income at the top 1 percent of the distribution., which has not been widely shared. The figure itself actually shows shares of total income, relative to shares at the start of the time period illustrated in the figure. The group falling between the 20th and 79th percentiles is seen lagging badly behind, with its share actually falling over a long stretch of time. It is interesting to realize that even a group as large as the middle 60 percent of the population is badly behind in reaping the benefits of productivity growth, which has been reasonably strong in the U.S. in recent years. In the U.S., such a broad income group includes mostly people who are thought of as being in the middle class–a large and hardly anomalous slice of the pie, if you will.

There are serious macroeconomic implications of this situation. Research indicates that the wealthiest spend a smaller share of their incomes than ordinary wage and salary earners, implying that people in these strata do not need the income at the margin and that distributional trends of this type could be expected to lead to subpar growth during economic expansions. Indeed, recent cyclical recoveries have not been strong. Of course, the current U.S. macroeconomic situation is also influenced by impaired income growth in the rest of the world, which is reeling from the effects of a collapse in oil prices, fiscal austerity, etc.

The session in Bob’s honor, which took place at an economics conference held earlier this month in San Francisco, was sponsored by an organization known as the Association for Evolutionary Economics, which espouses the original American Institutionalist economics. I first mentioned the session and Bob, who was a friend of mine, in this post. I thank David Howell for permission to use the figure from his presentation.

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