Ruh-roh! Once adjusted for inflation (CPI-U, All Items), it looks like real gains in household income have been concentrated amongst few over the last four decades. This seems timely considering the debate over the extension of the Bush tax-cuts. Click on the image for a larger version.
Please remember that real incomes trend toward stability, because if everyone's income increased, then prices would also increase, both because labor is an input of goods and services and because rising incomes would shift the demand curve to the right.
From the statistics, the income disparity have greatly increased since the late 1960's. It is either that the middle class fell or there are more millionaires nowadays.
ReplyDeleteI don't understand why the income becomes variable and isn't stable. I think the disparity has become so vast as the years go by.
ReplyDeletePlease remember that real incomes trend toward stability, because if everyone's income increased, then prices would also increase, both because labor is an input of goods and services and because rising incomes would shift the demand curve to the right.
ReplyDeleteNot exactly. GDP growth or other increases in efficiency can be reflected in higher incomes, period. If you want to talk about it in Marshallian terms that would be a shift of "the" (some kind of aggregate) supply curve to the right.
@isomorphismes correct. let's just say that real wage gains are roughly constrained by increases in productivity
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