Inequality—missing the story twice over
from David Ruccio
The OECD misses the story because of (a) how they measure inequality—they focus on the gap between the top and bottom deciles (the richest 10 percent of the population versus the bottom 10 percent) and forget about the growing inequality within the top 10 percent, especially the share of income going to the top 1 percent—and (b) how they determine the causes of inequality—focusing too much attention on the effects of technology and not enough on changing labor market institutions and the growth of finance.
But Rosnick and Baker also miss the story, in that fail to identify the source of the incomes that are captured by those in the top 1 percent—that is, they don’t trace the origins of the growing surplus as it originates in some sectors of the economy (based on rising productivity and stagnant wages) and how it has been siphoned off both upward (to the top 1 percent who run and own large corporations) and outward (especially into banks and other financial institutions).
Now, to be fair, both the OECD and Rosnick and Baker do get some things right. The OECD folks do admit that “that there is nothing inevitable about growing inequalities.” And Rosnick and Baker do understand that “changes in inequality in recent decades are driven in large part by increasing income shares at the very top – higher than the 90th percentile.”
The noninevitablity of the enormous gains of those at the very top of the income distribution is at least a start in telling a different story about the conditions and consequences of inequality in the United States and other OECD nations over the course of the past three decades.