Growth in income inequality has markedly slowed in the past decade. Yes, that’s right. Though few seem to care or have noticed, this trend has important implications for economic policy.
A recent report from the nonpartisan Congressional Budget Office has analyzed the data over the last four decades. From 1979 through 2007, inequality increased significantly, no matter how income was measured — whether or not it was based on market income (the sum of employment, business and capital income), or if it included government social insurance and safety-net payments, or if it subtracted federal tax payments. Depending on the income measure, the CBO found that inequality increased in this period between 23 percent and 31 percent.