Does Inequality Matter?

The remarkable achievement of the Occupy Wall Street movement has been to make continuing silence about inequality politically unacceptable. Some have criticized the movement for not pressing specific demands. Yet most protesters wouldn’t pretend to have a sophisticated understanding of the forces that have been causing growing income disparities, or the policy experience to prescribe what might be done about them. But now that the movement has forced inequality onto the agenda, the time is ripe to focus on these issues.
Because many continue to deny that income inequality has been growing, it’s useful to start with a brief review of how income growth patterns have changed since World War II. The three decades after the war saw incomes grow at an almost uniform 3 percent annual rate for families up and down the income ladder. Since the early 1970s, however, virtually all income gains have accrued to those whose incomes were highest to begin with.
It’s a striking fractal pattern. Most of the gains have gone to the top 20 percent of earners, but the lion’s share of the gains within that group have gone to the top 5 percent. And within the top 5 percent, most of the gains have gone to the top 1 percent, and so on.