Income Inequality: Still Bad, Still Complicated

The Center of Budget and Policy Priority’s new study on inequality is worth a read, even if the underlying story is, unfortunately, quite familiar.

It paints a distressing picture of the current "recovery":

A state-by-state examination finds that income inequality has grown in most parts of the country since the late 1970s. Over the past three business cycles prior to 2007, the incomes of the country’s highest-income households climbed substantially, while middle- and lower-income households saw only modest increases.

During the recession of 2007 through 2009, households at all income levels, including the wealthiest, saw declines in real income due to widespread job losses and the loss of realized capital gains. But the incomes of the richest households have begun to grow again while the incomes of those at the bottom and middle continue to stagnate and wide gaps remain between high-income households and poor and middle-income households. 

The study also highlights just how difficult it is to measure inequality, and why this is such an active area of debate among researchers, in its listings of different states and various income ratios of the richest X% to the poorest Y%.

Take my home state of Massachusetts, for example, as compared to Mississippi. According to the researchers’ rankings of "Greatest Income Inequality Between the Top and the Bottom, Late-2000s" (as well as the generally well-respected Gini coefficient), there’s (slightly) more inequality in the Bay State than in Mississippi.

But Massachusetts is likely an "easier" place to be poor in certain senses -- Mississippi has a dreadfully low Medicaid eligibility income cutoff level, higher unemployment, and spends just over half as much per student in its public schools as does Massachusetts.

These are just a few crude measures, of course, and Massachusetts is certainly a more expensive place to live. But the point here is that this sort of ratio, while very useful in pointing out the trajectory of inequality in this country (and in particular the way the very rich have run away from everyone else, no matter how far up the income ladder you go), doesn't fully capture the complicated ways it operates. And part of the reason we're stuck in neutral on some of these discussions is that conservatives use this complexity -- which does exist -- as a weapon, arguing, as John Stossel did in May, that because some poor people have cell phones or TVs, they're doing fine.