Morning Must-Read: Nick Bunker: Income Inequality Over the Business Cycle
I must say, Stephen Rose used to do very good work. But more and more I find that the stuff he puts out these days has a “gotcha” in it–a decision as to what to look at that is debatable, that shapes his conclusions massively, and that he does not warn me about his importance. Having to dig for what the “gotcha” is in each case is time consuming, boring, and annoying. I think he should stop.
Vir spectabilis Nick Bunker does the heavy lifting:
…has not risen since the end of the Great Recession… takes aim at research by University of California-Berkeley economist Emmanuel Saez showing that 95 percent of the income gains from 2009 to 2012 were captured by the top 1 percent of earners… assert[s claims]… inequality has risen since the Great Recession… based upon a ‘statistical gimmick.’
Rose… look[s] at changes in incomes since 2007, the peak of the last business cycle…. Saez and… Piketty show… income excluding capital gains… [of] the top 1 percent dropped from 18.3 percent in 2007 to 16.7 percent in 2009…. During economic expansions, workers at the bottom of the income ladder see very large gains and those at the top see large gains as well. Those in the middle miss out. And during recessions, the incomes at both ends lose the most…. By starting his measurement from the peak of the last business cycle in 2007, Rose includes the years that have the most income reduction for those at the top. But the expansion beginning in 2009… is not over….
Yes, if 2007 is the benchmark year, incomes at the top have declined. And yes, if 2009 is the benchmark year, incomes at the top have increased dramatically…. What isn’t reasonable is using a peak as a benchmark to claim inequality hasn’t increased over an incomplete business cycle…