To the extent that income inequality is a problem, it's not clear what can be done to resolve it. Among the contributing factors:
Economic growth. Strong economic growth, rising stock prices and household income inequality tend to go hand in hand.
Technology. Tech advances have put a premium on skilled labor, according to a Congressional Budget Office report . Because the pool of skilled workers hasn't grown as much as demand, their wages have climbed faster.
Free trade and immigration. Cheap labor abroad and an influx in low-skilled immigrants can depress wages at the bottom, according to the CBO.
Women in the workforce. As the CBO put it, "an increase in the earnings of women could boost inequality by raising the income of couples relative to that of households headed by single people."
Tax policy changes don't explain the widening income gap. The CBO found that, by one measure, "the federal tax system as a whole is about as progressive in 2007 as it was in 1979."
Thursday, November 3, 2011
Interesting Stats on Income Inequality
I never quite understood why people were linking taxation to the increasing spread between incomes of the super-rich and the middle class. An article from Investors Business Daily, quoting from the Congressional Budget Report might have the answer: