Friday 703

 

Are The Rich Are Getting Richer And The Poor Are Getting Poorer?
First, watch the video at this website first:
https://www.youtube.com/watch?v=UbueX92CKPk
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The information and illustrations in the video go by fast, the following is a review.
Figure numbers correspond to the time they appear on the video.
Figure 019:
Households are arranged by income shares of total income in five groups, quintiles, from top richest to bottom poorest income level, each quintile has the same number of households.
Figure 033:
From 1967 to 2009 the top quintile share of total income of increased from 43.6% to 50.3%.
Figure 038:
From 1967 to 2009 the bottom quintile share of income decreased from 4.0% to 3.4%.
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Looks like the rich are getting richer and the poor are getting poorer.
But this data does not consider two important points
- the share of total income does not tell you the amount of income received
- outcomes for particular households are not shown, each household income can change from year to year
Figure 134:
From 1967 to 2009 the real mean household income of the top quintile increased by 71%, from $100,059 to $170,844.
Figure 144:
From 1967 to 2009 the real mean household income of the bottom quintile increased by 25%, from $8984 to $11,552.
Figures 219 and 226:
We also need to follow individual households to find if they have moved among the quintiles.
In the following, looking at the top and bottom income groups we see there is much movement among the income quintiles over the years.
Comparing figures 219 and 226 we find from 1987 to 1996 45% of the red bottom quintile households in the have moved up to a higher quintile.
Figures 229 and 234:
Comparing figures 229 and 234 we find from 1996 to 2005 another 40% of bottom households have moved up to a higher quintile.
Figures 237 and 245:
We find from 1987 to 1996 42% of light blue top quintile households have fallen down to a lower quintile.
Figures 247 and 252:
We find from 1996 to 2005 another 40% of top income households have moved to a lower quintile.
Figures 314 and 320:
Across generations are the children of the rich getting richer and the kids of the poor getting poorer?
Comparing figures 314 and 320 we find children who grew up in richest 20% income households in the late 1960s, by the year 2000 their median income was about the same as their parents.
Figures 330 and 340:
Among children who grew up in poorest 20% income households in the late 1960s, by the year 2000 82% had higher income than their parents, the median being double their parents.
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These facts show, over the last 40 years:
- there has been much income improvement for the poor
- there is much income mobility among income groups
- overall, the poor are not getting poorer but instead are getting richer
“We should seek ways to expand opportunities for income growth, and with it greater absolute mobility for those across the income distributions.”
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In the U.S. are the rich getting richer and the poor getting poorer? Grok:
In the U.S., the rich are definitely getting richer faster, especially because they own more stocks, businesses, and real estate.
The top 1%’s share of income before taxes and transfers rose from 9% in 1979 to 18% in 2022.
But the poor are not simply getting poorer in absolute terms: incomes and poverty move up and down with the economy, and in 2024 the official poverty rate fell to 10.6% while median household income was roughly unchanged.
So the best answer is: the U.S. has become more unequal — the rich are pulling farther ahead, while the poor are not always poorer, but they are often falling behind relatively.
Inflation-adjusted median household income in the United States was approximately $59,400 in 1979 and $79,500 in 2022 in 2024 dollars.
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What are some ideas for closing the rich-poor gap? Grok:
Ideas include expanding pro-work tax credits like the Earned Income Tax Credit, strengthening the Child Tax Credit, improving schools and job training, making housing cheaper by allowing more building, helping low-income families save and invest, and taxing very large inheritances or capital gains more evenly.
The best approach is not to make the rich poorer, but to help poorer and working-class families earn more, own more assets, and face lower living costs.
The EITC is widely viewed as a major anti-poverty tool, and federal tax credits have been found to substantially reduce child poverty.
With the Earned Income Tax Credit a person with a low income rather than paying an income tax for the year would receive a credit, money, from the IRS.
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Would these efforts increase the wealth of the poor or just make the gap smaller? Grok:
Many of these efforts would increase the absolute wealth and living standards of the poor rather than merely narrowing relative gaps, though results vary by design.
The Earned Income Tax Credit reliably raises after-tax income, reduces poverty, and supports employment for low-income working families, delivering clear gains in resources and child outcomes that build long-term security.
Housing mobility programs and occupational licensing reforms similarly expand absolute opportunities by connecting people to better neighborhoods, schools, and jobs, with experimental evidence showing improved future earnings.
Minimum wage hikes and progressive taxes can boost earnings or fund transfers for some households, yet they risk offsetting effects such as employment losses or reduced growth incentives that limit broad absolute improvements for the lowest groups.
Well-targeted combinations of work-based supports and barrier-reducing reforms tend to deliver both higher absolute living standards for the poor and smaller gaps by expanding opportunity alongside redistribution.
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Would the overall amount of wealth (size of the economy) be reduced with these efforts?
The overall size of the economy would not necessarily be reduced by these efforts, as impacts depend heavily on specific design and scale rather than a uniform negative effect.
The Earned Income Tax Credit generally supports or maintains economic activity by encouraging work and channeling funds into consumption with minimal distortions.
Larger minimum wage increases carry risks of employment or hours reductions that could shrink output in affected sectors according to some projections, while high progressive tax rates may dampen investment and work incentives at the margin.
In contrast, occupational licensing reforms, zoning changes to boost housing supply, and education or mobility programs often enhance labor market efficiency, construction activity, worker matching to productive areas, and human capital formation, supporting longer-term growth and productivity gains.
Thoughtful combinations that prioritize opportunity and efficiency alongside targeted supports tend to preserve or expand total wealth rather than contract it.
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Would the growth rate of the size of the economy be reduced with these efforts? Grok:
The growth rate of the overall economy would not necessarily be reduced by these efforts and could even be supported by several of them, depending on design and scale.
The Earned Income Tax Credit tends to bolster labor force participation without major distortions, helping sustain or expand productive capacity.
In contrast, substantial minimum wage increases carry risks of employment reductions that could modestly slow output growth in low-wage sectors.
Very high progressive tax rates may dampen investment and entrepreneurial incentives over time.
Opportunity-focused measures such as occupational licensing reform, zoning changes to increase housing supply, and education or targeted mobility programs often enhance labor market efficiency, worker mobility to higher-productivity areas, and human capital formation, which support stronger long-term growth.
Thoughtful combinations that emphasize work incentives and barrier reduction alongside any redistribution are more likely to preserve or accelerate the economy’s growth rate rather than hinder it.