Do the Rich Capture All the Gains from Economic Growth?

[Chris]

No, that's a false narrative, here's why.

'Do the Rich Capture All the Gains from Economic Growth?' No, He Explains Convincingly.

One of the most provocative and persistent arguments against free-market capitalism claims that it's a rigged system in which those who are already wealthy are the only ones who really benefit. Under the pretense of being a wide-open meritocracy, the critique goes, what we call capitalism is really a closed system that not only distributes income gains unfairly but makes the poor feel as if their position in their lives is their fault. Market critics call for all sorts of interventions, transfers, and limits on freedom to make things right.

...When critics of market economies such as Thomas Piketty, Paul Krugman, Jared Bernstein, and others say that middle- and low-income Americans haven't gained income over the past 30 or so years, argues Roberts, they typically mis-measure the rate of inflation, ignore the growing role that fringe benefits play in total compensation, and include the elderly, who are less likely to be working full-time and thus skew results. But the really important omission, says Roberts, is that most critics fail to track specific individuals over time. Instead they track statistical averages. When you follow an individual income earner over the years, a very different—and much more optimistic—picture emerges...

What do the data show? One study finds that when you compare the income of parents working in the early 1960s to their children's income from the early 2000s, "84% earned more than their parents, corrected for inflation. But 93% of the children in the poorest households, the bottom 20% surpassed their parents. Only 70% of those raised in the top quintile exceeded their parent's income." A different study also found that kids in lower-income groups were far more likely to outstrip their parents' income than those born to wealthy parents: "70% of children born in 1980 into the bottom decile exceed their parents' income in 2014. For those born in the top 10%, only 33% exceed their parents' income."



What do the data show? One study finds that when you compare the income of parents working in the early 1960s to their children's income from the early 2000s, "84% earned more than their parents, corrected for inflation. But 93% of the children in the poorest households, the bottom 20% surpassed their parents. Only 70% of those raised in the top quintile exceeded their parent's income." A different study also found that kids in lower-income groups were far more likely to outstrip their parents' income than those born to wealthy parents: "70% of children born in 1980 into the bottom decile exceed their parents' income in 2014. For those born in the top 10%, only 33% exceed their parents' income."

...The answer, Roberts writes, is that the richest people in 1980 actually ended up poorer, on average, in 2014. Like the top 20%, the top 1% in 1980 were also poorer on average 34 years later in 2014. The gloomiest picture of the American economy is not accurate. The rich don't get all the gains. The poor and middle class are not stagnating....

[Common]

Chris I dont have charts and spreadsheets but I believe the rich gain the most by a huge margin. The rest get a smidgeon of what the rich get.

[Chris]

Chris I dont have charts and spreadsheets but I believe the rich gain the most by a huge margin. The rest get a smidgeon of what the rich get.

As the OP says, it depends on how you look at the data, if you look at groups or classes, it may be so, but if you look at individuals, it's not.

Thomas Sowell has pointed this out for a long time.

Another: Tracking the same US taxpayers over time shows significant income mobility from 1996 to 2005:

...While many studies have documented the long–term trend of increasing income inequality in the U.S. economy, there has been less focus on income mobility and the potential opportunity for upward mobility....

...There was considerable income mobility of individuals in the U.S. economy during the 1996–2005 period, and that the degree of relative income mobility among income groups is roughly unchanged from the prior comparable period (1987–1996). The analysis found that more than half of taxpayers moved to a different income quintile between 1996–2005. About half of those taxpayers in the bottom income quintile in 1996 moved to a higher income group by 2005. The analysis also found that the composition of the very top income groups changes dramatically over time. Less than half of those in the top 1 percent in 1996 were still in the top 1 percent in 2005. Less than one–fourth of individuals in the top 0.01 percent in 1996 remained in that group in 2005....

[Thomas Sowell:] Only by focusing on the income brackets, instead of the actual people moving between those brackets, have the intelligentsia been able to verbally create a “problem” for which a “solution” is necessary. They have created a powerful vision of “classes” with “disparities” and “inequities” in income, caused by “barriers” created by “society.” But the routine rise of millions of people out of the lowest quintile over time makes a mockery of the “barriers” assumed by many, if not most, of the intelligentsia.

[Captdon]

Chris I dont have charts and spreadsheets but I believe the rich gain the most by a huge margin. The rest get a smidgeon of what the rich get.

This is true. I can't say I haven't gained over the years. I know I live better at my age than I did at age 35. I don't have the actual job earnings either. I have more invested but That's not an opinion but it a fact. I didn't do anything special or inherit or anything out of the usual.

The rich have done far better than I have by any measure you can use.

I believe that both sides of this have exaggerated to some extent. The bottom line is that capitalism is by far the system that does the most good for the most people.

[nathanbforrest45]

The rich may get richer but so do the poor. The poor do not necessarily become rich but their income and quality of life certainly improves. I am a firm believer in "A rising tide lifts all boats". In 1955 the median family income was $5,000.00, adjusted for inflation that would be $25,000.00 today. However the median family income today is $40,000.00

[Chris]

Wage increases are the highest on record, business economists say

More firms report raising wages and salaries than at any time in 36 years, according to a survey of business economists out Monday.

A net 56% of respondents to the third-quarter National Association for Business Economics survey said their firms were raising wages, and no respondents said they expect wages to decrease over the coming quarter.

Firms may be coming to terms with an argument that many economists have been making for years: higher wages are critical for attracting workers. In the Q3 survey, fewer firms reported hiring without difficulty. Among those firms struggling to hire, 37% said they’re trying to address the gap by raising wages, 35% are training existing workers and 23% are “investing in labor-saving processes” such as improved technology and other productivity boosts.....