Home Daily Blitz Why We’ve Been Overstating the Problem of Income Inequality

Why We’ve Been Overstating the Problem of Income Inequality


reuters article The following is an excerpt from Rich Barlow | August 16, 2016 | Thefiscaltimes.com |

With disadvantaged people of various stripes backing Donald Trump and Bernie Sanders this year, is there any doubt that the United States’ have-nots have been wrung out by inequality?

The numbers seem to corroborate the tough-and-getting-tougher narrative: average real income up by 38 percent since 1989 for the top 5 percent of US households, while growing just 10 percent for the bottom 95 percent; the less wealthy half of Americans own a piddling 1 percent of the country’s total net wealth.

The numbers don’t lie—but they do overstate the problem, says Laurence Kotlikoff, professor of economics at Boston University.

In a recent paper posted by the National Bureau of Economic Research, he and coauthors Alan Auerbach of UC Berkeley and Darryl Koehler of Economic Security Planning say that for all their importance, inequality studies producing those numbers “fail an important test: none measures inequality in living standards, which should be the ultimate concern when assessing economic fairness.”

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