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October 26, 2014

Is Income Inequality Really Shrinking?

James Petholoukis of the American Enterprise Institute takes note of economist Michael Feroli’s analysis of wage growth.

“In particular, the 90-10 ratio compares earnings of workers in the top decile with those in the bottom decile and is sometimes used as a proxy for income inequality.”

“When the series began in 2000, workers in the top earnings decile earned 4.4 times as much in a usual week compared with workers in the bottom decile. The 90-10 ratio then steadily increased until it topped out at 5.3 in 2012Q3. Since then the ratio has come back down to 5.0 last quarter.”

042114inequality Is Income Inequality Really Shrinking?

  • DemInExile

    Really? A 13 year timeframe? And I bet this guy shows a chart for last 3 months of the DJIA to prove that stocks don’t rise anymore.

    And even in that pathetically small sample, a drop from 5.3 to 5.0 ratio over 1 quarter??? 1 quarter??????

    And, and even if it is real, I wonder if it actually shows a worsening level of inequality – the minimum wage is set, the poorer workers can’t earn less, so if the wage ratio is declining for the top 10%, could it mean that most of the top 10% are losing out and seeing their incomes shrink, while the true top earners who rely more on investment income and other forms of income that will not show up as wages continue getting wealthier and wealthier? I don’t know if this is how the 90-10 ratio works, but call me skeptical of an AEI report that income inequality is decreasing.

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