Do the Rich Capture All the Gains from Economic Growth?
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Re: Do the Rich Capture All the Gains from Economic Growth?
#2TLDR Not so simple.
First, purchasing power is not considered. If wages are stagnant, but most consumer goods have gotten cheaper, then the bottom 50% with stagnant wages is capturing productivity gains.
Second, there’s no account for economic mobility. Wages for the bottom 50% are stagnant but most people don’t stay the same income all their life. There’s no account of economic mobility.
From the article: “As in the other panel studies, when you follow the same people, the biggest gains go to the poorest people. “
Re: Do the Rich Capture All the Gains from Economic Growth?
#3Adjusted for inflation, the US economy has more than doubled in real terms since 1975. How much of that growth has gone to the average person? According to many economists, the answer is close to zero.
First of all, the population has increased from around 200M to 325M. The inflation-adjusted economic output would have to increase by that same factor just to say the same per capita.
Re: Do the Rich Capture All the Gains from Economic Growth?
#4TLDR Not so simple. First, purchasing power is not considered. If wages are stagnant, but most consumer goods have gotten cheaper, then the bottom 50% with stagnant wages is capturing productivity gains. Second, there’s no account for economic mobility. Wages for the bottom 50% are stagnant but most people don’t stay the same income all their life. There’s no account of economic mobility. From the article: “As in the…
That is not the TLDR. The post is about cross-cohort vs. same-cohort comparisons. The argument is that if you follow the same people over time, the poor make the biggest percentage gains.
Nothing in this is about inflation or prices of consumer goods. And in fact, inflation metrics take that into account.
Re: Do the Rich Capture All the Gains from Economic Growth?
#5TLDR Not so simple. First, purchasing power is not considered. If wages are stagnant, but most consumer goods have gotten cheaper, then the bottom 50% with stagnant wages is capturing productivity gains. Second, there’s no account for economic mobility. Wages for the bottom 50% are stagnant but most people don’t stay the same income all their life. There’s no account of economic mobility. From the article: “As in the…
If wages are stagnant with respect to the consumer price index, they are not capturing productivity gains, because the CPI accounts for lower prices on goods.
Re: Do the Rich Capture All the Gains from Economic Growth?
#6I'd like to add to this argument.
If Ohio's steel industry grows by 500% who reaps the benefits? Me? The guy writing code in Portland, Oregon?
No... its pretty clear that a specific subset of people receive the benefits. The people who own the steel mill. The people who receive employment from the steel mill. The governments which tax the steel mill. But not me.
Economic growth isn't uniform. Its an uneven field that benefits some and not others. That's why people move and change jobs. That's why societies abandon old interests and embrace new interests.
I don't know why anyone should feel entitled to economic growth if they didn't participate in it in any way.
Re: Do the Rich Capture All the Gains from Economic Growth?
#7I'd like to add to this argument. If Ohio's steel industry grows by 500% who reaps the benefits? Me? The guy writing code in Portland, Oregon? No... its pretty clear that a specific subset of people receive the benefits. The people who own the steel mill. The people who receive employment from the steel mill. The governments which tax the steel mill. But not me. Economic growth isn't uniform. Its an uneven field that…
Because many of those people have the experience of participating in economic growth then being denied the benefits, and so when they see it elsewhere, they assume the same thing is happening to those workers as well.
Re: Do the Rich Capture All the Gains from Economic Growth?
#8I'd like to add to this argument. If Ohio's steel industry grows by 500% who reaps the benefits? Me? The guy writing code in Portland, Oregon? No... its pretty clear that a specific subset of people receive the benefits. The people who own the steel mill. The people who receive employment from the steel mill. The governments which tax the steel mill. But not me. Economic growth isn't uniform. Its an uneven field that…
The Federal government taxes the steel mill and the tertiary industries that are able to thrive because that steel mill is generating revenue.
You directly benefit from countless federal programs and indirectly benefit from even more.
Re: Do the Rich Capture All the Gains from Economic Growth?
#9I find it somewhat unsurprising that if you follow individuals over time, you would see that poor people gain more than rich people on a percentage basis.
The question is, what percentage of people are gaining? One success story can significantly affect the mean when you’re starting from a small number.
Re: Do the Rich Capture All the Gains from Economic Growth?
#10I'd like to add to this argument. If Ohio's steel industry grows by 500% who reaps the benefits? Me? The guy writing code in Portland, Oregon? No... its pretty clear that a specific subset of people receive the benefits. The people who own the steel mill. The people who receive employment from the steel mill. The governments which tax the steel mill. But not me. Economic growth isn't uniform. Its an uneven field that…
I think that the complaint is more that the people who receive employment from the steel mill do not receive a portion of the increased profits. Instead they go only/mostly to the owner of the steel mill.
As I understand it, looking at the numbers for the country as a whole is more meant as a way to observe overall trends. I don't think its meant to say that literally everyone across the country should benefit from any gains in any part of the country (or similarly gains in industries that they are not a part of),