Do the rich capture all the gains from economic growth?

Tuesday, November 13th, 2018

Do the rich capture all the gains from economic growth? Russ Roberts explains why it matters how you measure these things:

But the biggest problem with the pessimistic studies is that they rarely follow the same people to see how they do over time. Instead, they rely on a snapshot at two points in time. So for example, researchers look at the median income of the middle quintile in 1975 and compare that to the median income of the median quintile in 2014, say. When they find little or no change, they conclude that the average American is making no progress.

But the people in the snapshots are not the same people. These snapshots fail to correct for changes in the composition of workers and changes in household structure that distort the measurement of economic progress. There is immigration. There are large changes in the marriage rate over the period being examined. And there is economic mobility as people move up and down the economic ladder as their luck and opportunities fluctuate.

How important are these effects? One way to find out is to follow the same people over time. When you follow the same people over time, you get very different results about the impact of the economy on the poor, the middle, and the rich.

Studies that use panel data — data that is generated from following the same people over time — consistently find that the largest gains over time accrue to the poorest workers and that the richest workers get very little of the gains. This is true in survey data. It is true in data gathered from tax returns.


  1. Bob Sykes says:

    The median income hides the results. The data show that working class people have actually lost real income over the last 40 years; middle class incomes have stagnated; and upper class incomes have soared.

    Not only have the rich captured all the economic growth of the last 40 years, they have clawed income away from the working class.

    This is really not surprising; it follows from Econ 101. The elites have imposed policies that shut down America’s high profit, high wage, high tax revenue industrial base. They have done this via free trade and off-shoring and regulation. They have also supported mass immigration of uneducated, unskilled peasants, both legal and illegal, who compete directly with the working class.

    The elites also support H1B visas that allow low wage Indians and Chinese immigrants to displace native America skilled workers.

    This is class warfare writ large.

  2. Gaikokumaniakku says:

    I agree with Bob Sykes: The elites have imposed policies that shut down America’s high profit, high wage, high tax revenue industrial base. I don’t have a formal sample, but I have a huge body of anecdata.

    Collecting data on the former middle class is hard because when you start out middle class and fall into the lower class, you don’t really want to share your experiences with random strangers.

  3. Sam J. says:

    Bob Sykes is right. The fix is in.

  4. Felix says:

    Hold on here.

    The article posted gives reasons why one of the statistical supports behind the story that Bob so clearly states – is bogus. And Bob leads off with a slight variant of those bogus statistics. And doesn’t even mention, let alone address, the article’s points!

    I’ve noticed the same thing Russ Roberts wrote about. (among other problems with those stats) So, when in his first two paragraphs, Bob acknowledges he, himself, is fooled by lying statistics, I question the rest of Bob’s story.

    @Gaikokumaniakku – Because if there’s anything elites don’t want it’s high profit, high wage, high tax revenue bases?

  5. Albion says:

    The problem for economics is it isn’t divorced from the world it lives in. While marine biologists study plankton they only occasionally swim in the sea, but economists are mindful everyday of the factors that affect their income. In other words, economists have living standards too and feel bites and surges just as much as everyone else. Does this colour vision and reasoning? Possibly.

    As for importing low-paid workers to displace the existing workforce isn’t about economics. It is to gather votes, and votes keeps the jobs going for the elite. Their economics are about the money they are paid and what they can buy.

  6. Gaikokumaniakku says:


    Many of the elites are psychopaths. They are not rational in the way that normal people are.

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