This Political Moment, In Two Economic Charts

Rich and poor are getting richer. The middle is not.

Behold a chart from my new favorite website, Realtime Inequality, which allows you to slice and dice inequality data in a zillion different ways. Above we have an illustration of what I called, in a 2012 book, The Great Divergence. This chart tracks labor income only. Note that income growth for the third quartile (the somewhat-better-than-middle place in the income distribution, a.k.a. the middle class, though one can also define the middle class in other ways) has scarcely budged over the decades, while the top 10 percent (a.k.a. the haute bourgeoisie) has doubled its income after inflation, and the top 1 percent (a.k.a. the rich) has more than tripled its income.

Now let’s look at the labor-income trend during the same period for the bottom quartile relative to the third (middle-class) quartile:

Here we see not an ever-widening gap but a gap that widens and shrinks, then widens and shrinks again. As of March 2023 labor income for the third quartile was up 65 percent since the 1970s, after inflation, which is not very good. Labor income for the bottom quartile was up 49 percent, which also not very good, but which is much closer to the third quartile than it was around the time of the Great Recession in 2007-9, and also much closer than it was for most of Ronald Reagan’s presidency, which in various ways was a catastrophe for the poor. It’s never good to be situated in the bottom quartile of the income distribution. But being there is nowhere near so bad as it was during most of the past half-century. Income growth for the bottom and the middle has been converging for about a decade.

I submit that these two charts go a long way toward explaining our politics. The big income-inequality trend that people talk about—the decline of the middle class in both absolute terms and relative to the rich—continues unabated. Meanwhile, income inequality between the bottom and the middle, which has followed no consistent pattern, is diminishing. This is great news for low-wage workers. Hurrah! They’ve acquired some market power! But it isn’t great news for middle-class workers to hear that the distinction between being poor and being middle class is getting blurry. They have a legitimate gripe that their wages have stagnated (i.e., risen only 65 percent). They also have an illegitimate gripe that their imagined superiority to the poor is being undermined. Add water, stir, and you get white nationalism, xenophobia, and the assorted other pathologies of MAGA Republicanism. That’s the subject of my latest New Republic piece. You can read it here.