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Inequality Skyrocketing in US

Inequality Skyrocketing in USInequality Skyrocketing in US

Inequality in the United States has exploded over the past 40 years, something that’s been documented at great length by economists, most notably Thomas Piketty and Emmanuel Saez.

If you’d expect that shift to increase desire for redistributive policies like higher taxes on the wealthy, you’d be wrong, Quartz reported.

From 1978 to 2006, the average American became less likely to say that the government should reduce differences in income, according to a new NBER paper from researchers at Yale and Princeton. The decline is the equivalent of 12% of the average difference between Democrats (who tend to support redistribution) and Republicans (who don’t) on the issue, a measure the researchers call a “partisan unit.”

The magnitude of this measure varies throughout the study. For some context, Pew estimates that around 88% of Democrats believe the government should take some action on inequality, while 61% of moderate Republicans and 40% of conservative Republicans agree.

That redistribution is losing favor is puzzling on its face. But what’s even more startling are the causes.

The shift is being driven in large part by a strong increase in negative opinions concerning redistribution among people over 65 (more than 50% of a partisan unit), even as younger people moved the other way. That’s in contrast to the 1970s, when older people were substantially more likely to support redistribution than the average population.

 Income Gap Between Blacks and Whites

The other demographic curiosity? There’s been no significant movement on the issue by whites overall, but blacks have substantially reduced their support for redistribution. That comes even as the income gap between blacks and whites is closing at a much slower rate.

These trends are especially surprising considering both elderly people and African Americans are statistically much more likely to receive government transfers.

Standard explanations—that general economic well-being has increased, which should reduce support of redistribution—doesn’t account for either of these shifts. Neither does a trend towards ideological or cultural conservatism.

The elderly shift against redistribution is a US phenomenon; you don’t see it at all in other developed countries. The big difference is in health insurance: The US is the only place that guarantees it for people above 65, but no other demographic.

As the American left has tried to extend that benefit to a larger group, their efforts have been met with resistance from those who already enjoy it. The worry is likely that any additional spending will come at their expense.

  Fair Distribution

Sure enough, the researchers found that despite the fact that they are among the biggest beneficiaries, the elderly tend to oppose extending government provided health insurance, and the numbers who feel that way have grown substantially. All told, feelings about health insurance may explain as much as 60% of the shift regarding redistribution.

That isn’t the case for blacks. A lot of attitudes around redistribution have to do with “fairness;” people who believe economic reward is doled out fairly don’t tend to support changing the distribution. Many black people with forebears who were slaves or lived in the segregated south tend to believe rewards aren’t distributed fairly, which helps explain why they’re generally more likely to be in favor of redistribution than white people.

So why has that shifted by the equivalent of about half of the average Republican/Democrat gap? The researchers had trouble pinpointing why, but part of it comes from a relatively recent trend in the survey data.

“Blacks view the economic system as becoming increasingly fair and are decreasingly supportive of government targeted aid based on race,” the authors write.

That explains (in a regression sense) about half of the trend among blacks away from favoring redistribution.

Financialtribune.com