Must-Read: Pedro Nicolaci da Costa: Income gap between upper-middle class and very rich

Must-Read: As I often say, income stagnation among the income-distribution slots in the bottom half of the population is a thing—even with very generous valuations applied to cheap and ingenious high-tech information-age electronic devices and services. And slow growth in income over the past generation for the slots between the 50th and the 80th percentile is a thing as well. But one other factor in American political economy is that those from the 80th to the 99th percentiles feel hard done by—even though the incomes of those slots have increased at what would in any other age be taken as a healthy clip, especially if one values the high-tech information-age generously.

But they are unhappy too. Why? Relative income factors. They do not compare themselves not to the mass of the population or to historical long-run rates of income growth. They compare themselves to the top 0.1%—the top 150,000 households, about 6000 of them in Greater San Francisco and about 500 of them in Greater Kansas City. And they compare themselves to the top 0.001%—1500 households, about 60 in Greater San Francisco and about 5 in Greater Kansas City, and feel small: e^{(6 x 35)} = 8, after all:

Pedro Nicolaci da Costa: Income gap between upper-middle class and very rich: “Destabilizing levels of income inequality, once a problem reserved for developing nations, is now a defining social and political issue in the United States… http://www.businessinsider.com/income-gap-between-upper-middle-class-and-very-rich-2017-7

…Economists and conservative commentators have tried to blame inequality on educational levels, arguing that those with college degrees have fared well in the so-called knowledge economy…. David Brooks recently declared:

There is a structural flaw in modern capitalism. Tremendous income gains are going to those in the top 20%, but prospects are diminishing for those in the middle and working classes. This gigantic trend widens inequality, exacerbates social segmentation, fuels distrust and led to Donald Trump…

Richard Reeves, a senior fellow at the Brookings Institution, makes a similar case….

The strong whiff of entitlement coming from the top 20% has not been lost on everyone else,” he writes in a recent opinion piece…..

Gabriel Zucman… wasted little time in countering the argument:

No, @nytdavidbrooks tremendous gains are not going to the top 20%. They are going to top 1%…

Nicholas Bluffie… at the Center for Economic and Policy Research:

The problem with this type of analysis is that it misleads readers into thinking that a large group of well-educated Americans have benefited…. In reality, the ‘winners’ from increased inequality are really a much smaller group of incredibly rich Americans, not a large group of well-educated, upper-middle-class workers…

Blaming America’s wealth divide merely on educational differences may be easy, but not particularly useful.