Home > Uncategorized > Inequality and immiseration (4 graphs)

Inequality and immiseration (4 graphs)

from David Ruccio

It’s clear that, for decades now, American workers have been falling further and further behind. And there’s simply no justification for this sorry state of affairs—nothing that can rationalize or excuse the growing gap between the majority of people who work for a living and the tiny group at the top.

But that doesn’t stop mainstream economists from trying.


Look, they say, American workers are clearly better off than they were before. Both real weekly earnings (the blue line in the chart) and the median household income (the red line) are higher than they were thirty years ago.  

There’s no denying that, on average, the absolute level of worker pay and household income has gone up. That’s proof, mainstream economists argue, that workers are enjoying the fruits of their labor.

fredgraph (1)

The problem, though, is that the increase in workers’ wages (the blue line, the same as in the previous chart) pales in comparison to the rise in labor productivity (the green line in the chart above): since 1987, real wages have gone up only 8 percent, while productivity has grown by 75 percent.

In other words, American workers are producing more and more but getting only a tiny share of that increase.

fredgraph (2)

It should come as no surprise, then, that the wage share of national income (the purple line in the chart above) has fallen precipitously—by 8 percent since 1987 and by 16.5 percent since 1970.

American workers are in fact experiencing a relative immiseration compared to their employers, who are able to capture the additional amount their workers are producing in the form of increased profits. Moreover, American employers have every interest—and more and more means at their disposal—to continue to widen the gap between themselves and their workers.


Not surprisingly, the relative immiseration of American workers shows up in growing inequality—with the share of income captured by the top 1 percent (the orange line in the chart) increasing and the share going to the bottom 90 percent (the brown line in the chart) falling. Each is a consequence of the other.

American workers are getting relatively less of what they produce, which means more is available to distribute to those at the top of the distribution of income.

That’s what mainstream economists can’t or won’t understand: that workers may be worse off even as their wages and incomes rise. That problem flies in the face of every attempt to celebrate the existing order by claiming “just deserts.”

There’s nothing just about the relative immiseration and growing inequality faced by American workers. And nothing that can’t be changed by imagining and creating a radically different set of economic institutions.

  1. October 9, 2017 at 6:42 pm

    Actually both firms and labor are losing out to the financial sector. Just before the GFC finance reached 40% of private sector profits. This same number was about 5% after WWII. Executive bonuses in non financial firms are a tiny fraction of labors share of output. Pull on this thread and you will be appalled at what has happened to both labor and non financial firms.

    • October 9, 2017 at 8:55 pm

      GFC = 2008 crash?

      I read that the financial sectors (including real estate and other asset areas) reached 40% in 1929 and were approaching the same levels recently. I don’t think I have seen that firmed up, though, recently.

      This is nothing more than supply and demand. Rich people don’t buy more milk when they get more money. They do buy more assets. The growth in the financial sector when returns get harder and harder to find actually seems more like a buffering action redirecting some of enormous “rent” profits to actual workers when dollars chasing returns start to swamp the economy then they do a source of the inequality. I would label wages and taxes (and the set of laws that affect those) as cause and the Financial sector effect even despite the inequality you find in the finance-related sectors themselves.

  2. patrick newman
    October 10, 2017 at 10:49 am

    To what extent does the picture look more equal post tax given that very wealthy individuals can avoid the more severe effects of tax through various devices and consumer tax – like VAT or sales tax is regressive in its effects. I suspect the inequality of disposable income is very high – higher perhaps than these figures suggest.

  1. No trackbacks yet.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.

%d bloggers like this: