Wednesday, January 9, 2013

Declining Family Incomes – Almost All Income Gains Go to the Top Earners

The Last 10 Years in Two Charts

Here are two basic principles of Economics.

An economy cannot grow substantially and prosper when median family income is declining.

An economy cannot grow substantially and prosper when all of the growth accrues to the very top income group.

The conclusion from these charts – The U. S. Economy Cannot Have Substantial Growth until median family income starts to rise and the increased income from growth accrues to persons other than the very wealthiest Americans.   (What, you were expecting something different?)

The economic boom that peaked in 2007 represented the first time that median real (that is, inflation-adjusted) incomes did not recover to their previous peak before declining into the next recession. More ominously, family incomes have yet to recover, even though the recession ended three and a half years ago. That has brought the total decline in real incomes to nearly 9 percent since 2000. So where has the economic growth from the recovery gone? Much of it has gone to corporate profits, as companies took advantage of the high unemployment rate and the ability to shift production globally to hold down wages in the United States.
The rise in income inequality has exacerbated the decline in median incomes. In 2010, a stunning 93 percent of all income gains went to the top 1 percent of Americans. Also astonishing: just 15,000 households received 37 percent of all of those income gains. In no other period in recent American history have economic gains been concentrated so disproportionately in an elite sliver. (The red bars indicate recessions.)

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