The focus should be less on the gap between rich and poor and more on how to ensure that economic gains are widely shared.
Growing economic inequality is either “a major issue of our time” or “a defining challenge of our time,” depending on your taste for hyperbole. Given America’s recent experience, however, I would like to call for a timeout. What matters is not so much the level of inequality as how we narrow the gap: The important thing is to create the conditions for widespread growth.
After years of a widening gap between the rich and poor in the US, income inequality is finally narrowing — and yet few Americans are happy about the state of the economy. Inequality shrank only because middle and high earners experienced real wage drops, while low earners did better.
In the last four years, lower-income Americans experienced significant wage gains. The bottom 10% saw their wages increase 8% after accounting for inflation. But almost everyone else did worse: Median income earners’ wages fell and are now where they were in 2020, while the top earners had a 6% real wage cut. The result is a decline in wage inequality. In 2019, the top 10% earned about eight times more than the bottom 10%. By 2024, that had dropped to seven times more. The top 10% earned 2.6 times more than the median in 2020, but 2.5 times more in 2024.
Continue reading the entire piece here at Bloomberg Opinion (paywall)
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Allison Schrager is a senior fellow at the Manhattan Institute and a contributing editor of City Journal.
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