Friday, January 24, 2014

Who benefited how much from two decades of economic growth?

Source: Pew Research Center
I think I can explain this graph. The horizontal axis is the percentile of global income. Thus at the point half way between 45 and 55, you have people at the mid point in global income (probably a band from 47.5 to 52,5 percent of global income. The authors of the table must have taken the estimate of average real income for this group in 2008 and subtracted that in 1988 to calculate the "real income growth". Note that the same people or indeed the same countries may not be in the same income group over a 20 year period.

Still, I think the point made in the chart is important. The increase in real income over a two decade long period helped a large swath of people who were relatively poor. Look however at this chart from the original source:

Those in the top five percent of the income distribution got so much of the total, that there percent increase made them a lot more money. Thus the top one percent who got 60 percent more income in 2008 than the top one percent got in 1988, also got 27 percent more of total gains of income. The top five percent took more than half of the total gain. (Again, some new billionaires joined the top one percent, some individual rich people dropped out over the two decades.)

Thus the picture is mixed. There remained a group of very, very poor people. Some income growth went to a wide swath of low income groups who actually benefited quite a bit. The middle class in the developed world tended to do poorly. The rich got richer.

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