Shared Prosperity Lost

October 18, 2010 at 5:09 pm

Describing the social and economic costs of growing income inequality, economist Robert Frank explained in yesterday’ New York Times that while the first three decades after World War II were a time of broadly shared prosperity, income gains over the next three decades went almost entirely to the very wealthy. You can see the striking contrast in the graph below.

In the first generation following World War II, a rising tide really did lift all boats. Incomes for families just 20 percent up the income ladder, median-income families halfway up the ladder, and families 95 percent of the way to the top all roughly doubled between 1947 and 1973, after adjusting for inflation. The period since then has been a different story altogether.

The chart shows the divergent trends between the rich and everyone else since the 1970s that we have analyzed in greater detail here and here.

As we also noted recently, the average middle-income American family had $13,000 less after-tax income in 2007, and an average household in the top 1 percent had $782,600 more, than they would have had if incomes of all groups had grown at the same average rate since 1979.

That’s something to keep in mind as the President and Congress decide which of President Bush’s tax cuts to extend — and which to let expire on
schedule at the end of this year. After all, as we have noted, each year the average millionaire gets about $125,000 from the Bush tax cuts, according to the Urban-Brookings Tax Policy Center.

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More About Chad Stone

Chad Stone

Chad Stone is Chief Economist at the Center on Budget and Policy Priorities, where he specializes in the economic analysis of budget and policy issues. You can follow him on Twitter @ChadCBPP.

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3 Comments Add Yours ↓

Comments are listed in reverse chronological order.

  1. Thomas Jenkins #

    I agree with you entirely. Throughout the nation, particulaly in states like Michigan, Indiana,Ohio and deep south as a whole. While the norther states have enjoyed a solid middle class standard of living buying/building new homes sending their children to college with employer provided health insurance.

    The south with its right to work mentality never has never enjoyed a similar such a life. Now that many were beginning to pull themselves out their near poverty existence they a re once again being pushed down. Lacking necessary skills to change they are seeing their lives sliding down. Unemployment is rife in South Carolina and in all likelihood will stay rhat way for a long because the leadership has been more interest party ortodoxy rather than the economic problems facing the people they represent.

  2. 2

    If the wealthy do not share in their prosperity, they are useless to the rest of us. And since their own wellbeing ultimately depends on a robust economy, they are destroying the foundations of their own wealth. Considering the wealthy are effectively running things, their combined actions smack of incompetence.

  3. 3

    and an average household in the top 1 percent had $782,600 more, than they would have had if incomes of all groups had grown at the same average rate since 1979.

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