Archive for the 'Critiques and Commentary' Category

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Is the Top 10% getting richer?

Published on April 6, 2006 in Critiques and Commentary, Income - High and United States. Closed

Frome a Paul Krugman editorial in the New York Times

A new research paper by Ian Dew-Becker and Robert Gordon of Northwestern University, “Where Did the Productivity Growth Go?,” gives the details. Between 1972 and 2001 the wage and salary income of Americans at the 90th percentile of the income distribution rose only 34 percent, or about 1 percent per year. So being in the top 10 percent of the income distribution, like being a college graduate, wasn’t a ticket to big income gains.

But income at the 99th percentile rose 87 percent; income at the 99.9th percentile rose 181 percent; and income at the 99.99th percentile rose 497 percent. No, that’s not a misprint.

Just to give you a sense of who we’re talking about: the nonpartisan Tax Policy Center estimates that this year the 99th percentile will correspond to an income of $402,306, and the 99.9th percentile to an income of $1,672,726. The center doesn’t give a number for the 99.99th percentile, but it’s probably well over $6 million a year.

[tags] Paul Krugman [/tags]

Popularity: 2% [?]

A Critic of InfoGraphics in the Washington Post

Published on March 22, 2006 in Critiques and Commentary. Closed

Jon Udell’s blog post about visual explanations in the Washington Post. After pointing out some problems with two graphs that he found that paper he goes on to say:

First, that we all need all need more and better tools to help us create and analyze these visual explanations. Second, that the natural home for such tools is online. We should expect to find much more there than static PDFs of the printed infographics. The data, as well as the interactive tools used to analyze the data, can and should be online. It should be straightforward to verify facts and explore alternate interpretations.

Although I would agree with this sentiment, the current size and resolution of monitors limits their ability to display data visualizations effectively. However, the New York Times is making some effort to include Flash-based interactive graphics in their online edition: The State of Executive Pay in 2005

Popularity: 2% [?]

Housing prices and perception of wealth

Published on March 15, 2006 in Cost of Living, Critiques and Commentary and Housing. 2 Comments

Looking at the effect the increase in housing prices on people’s perception of wealth.

So again, has the housing bubble created a wealth illusion? It does seem that many Americans feel wealthier because of the large increases in home equity in recent years. However, it is difficult to gauge how people feel about their wealth. The most obvious way to demonstrate that we feel wealthier because of increases in home equity is by measuring how much equity many Americans have pulled out of their homes in recent years. As we have seen in this paper, the numbers are enormous. Most people will not use their homes as a piggybank unless they are feeling pretty good about your wealth (or if they are very desperate – it doesn’t appear that many people fall into this category). Based on this, it is safe to say that most of us are feeling wealthier these days because of the soaring prices of our homes.

Popularity: 2% [?]

United States’ Estate Tax Returns 1916-2000

Published on March 15, 2006 in Critiques and Commentary, Income - High, NBER, Tax Rates and United States. Closed

If you are looking for a possible explanation for dramatic change in income I showed in my previous set of posts. Here is an abstract from a paper by the same authors:

This paper presents new homogeneous series on top wealth shares from 1916 to 2000 in the United States using estate tax return data. Top wealth shares were very high at the beginning of the period but have been hit sharply by the Great Depression, the New Deal, and World War II shocks. Those shocks have had permanent effects. Following a decline in the 1970s, top wealth shares recovered in the early 1980s, but they are still much lower in 2000 than in the early decades of the century. Most of the changes we document are concentrated among the very top wealth holders with much smaller movements for groups below the top 0.1%. Consistent with the Survey of Consumer Finances results, top wealth shares estimated from Estate Tax Returns display no significant increase since 1995. Evidence from the Forbes 400 richest Americans suggests that only the super-rich have experienced significant gains relative to the average over the last decade. Our results are consistent with the decreased importance of capital income at the top of the income distribution documented by Piketty and Saez (2003), and suggest that the rentier class of the early century is not yet reconstituted. The most plausible explanations for the facts are perhaps the development of progressive income and estate taxation which has dramatically impaired the ability of large wealth holders to maintain their fortunes, and the democratization of stock ownership which now spreads stock market gains and losses much more widely than in the past.

Top Wealth Shares in the United States, 1916-2000: Evidence from Estate Tax Returns

Popularity: 1% [?]

History of income inequality in the United States

Published on February 28, 2006 in Critiques and Commentary, Income - Inequality, Distribution and United States. 1 Comment

“Distribution of Income” written by Frank Levy for The Concise Encyclopedia of Economics. It discusses the history of income inequality in the United States in the 2oth century. A couple interesting comments about the 80s and why people felt that the Middle Class was disappearing:

When incomes grow rapidly, more inequality means that the poor get richer but the rich get richer faster. But when inequality increased in the slow-growth eighties, some groups’ incomes fell in real terms. Between the business cycle peak of 1979 and the next business cycle peak of 1989, the average income of the poorest fifth of families fell from $10,900 to $10,200, while the average income of the top fifth grew from $89,600 to $97,600. Moreover, the price of two key pieces of a middle-class life—a single-family home and a college education—grew faster than the general rate of inflation and faster than average incomes. For all of these reasons, slow income growth played a key role in perceptions of a vanishing middle class . . .

. . . even though overall family income inequality has not increased very much.

Popularity: 3% [?]

Change in incomes since 1967 (middle, upper-middle quintiles)

Published on February 23, 2006 in Critiques and Commentary, Income - High, Income - Middle, Income - Total, Aggregate, Line Graph, US Census and United States. Closed

While seaching for more income research I stumble across a reference to Census and Fed reports about income and wealth at independentsources.com but they link to johnbatchelorshow.com which is copy of an op-ed piece from The Wall Street Journal. (Unfortunately neither site links to the actual reports.)

But this quote from the op-ed caught my eye:

Back in 1967, the income range for the middle class (i.e., the middle-income quintile) was between $28,000 and $39,500 a year (in today’s dollars). Now that income range is between $38,000 and $59,000 a year, which is to say that the middle class is now roughly $11,000 a year richer than 25 to 30 years ago. This helps explain why middle-income families can buy things like cable TV, air conditioning, DVD players, cell phones, second cars and so on, that were considered mostly luxury items for the rich in the 1950s and ’60s.

The upper-middle class is also richer. Those falling within the 60th to 80th percentile in family income have an income range today of between $55,000 and $88,000 a year, which is about $24,000 a year higher than in 1967. This rapid upward income mobility indicates that the great American Dream, in which each generation achieves a higher living standard than their parents, is alive and well.

I looked at both the Census’ Historical Income Tables for Households and for Families and it looks like the household data is a closer match to the data in the quote above but neither is an exact match. (Earlier I had graphed the share of family income going back to 1947 based on Census data, which is why I knew about the data tables. )

I went ahead and graphed the income ranges for the “middle class” 40-60 percentile and the “upper middle-class” 60-80 percentile mentioned in the op-ed (1967-2004), for both households and families. While the 40% and 60% lines are increasing over time it is the 80% line that is increasing the most. In other words, the higher your income the greater your increase in income.

householdncome_40_60_80

familyincome_40_60_80

Addendum:
I am added the percentage increase for each chart
Household – consists of all the people who occupy a house, an apartment or other group of rooms, or a single room occupied as separate living quarters.
40th percentile = 24%
60th percentile = 39%
80th percentile = 55%

Family – a group of two people or more related by birth, marriage, or adoption and residing together.
40th percentile = 34%
60th percentile = 52%
80th percentile = 68%

Looking at the definitions some of the differences between household data and family data could be due to an increase in two-income families.

Popularity: 3% [?]