We’re baking a smaller economic pie and cutting less equal slices. Percent versus 2.6 percent over the 2000s cycle).
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growth rate over the full 1960s cycle was 4.5 Not only are we now faced with slower growth, but that lesser growth rate is much more narrowly distributed (for broader historical reference: the real annualized G.D.P. Source: Bureau of Economic Analysis and Piketty, Saez. Onto the poverty result that I and others have been describing. The chart below paints a pretty clear picture of thatĭynamic, showing low, middle and high family incomes growing together and then growing apart (levels are indexed to 100 in 1973 so as to track the relative trends). Inequality serves as a wedge or a funnel in this model, redirecting growth from a broad swath of households across the income scale to a narrow slice at the top. (Such analysis riffs off the distinction between primaryĪnd secondary distributions that I discussed in an earlier post.)
growth, or there will have to be a lot more transfers to offset inequality’s poverty-inducing impact. If less of the economy’s market-generated growth - i.e., before taxes and transfers kick in - ends up in the lower reaches of the income scale, either there willīe more poverty for any given level of G.D.P. Official poverty rates and predicted rates with pre-1973 G.D.P./poverty relationship. It was also - among many other factors, of course - growing inequality. That simply shows poverty ending a few years before the other prediction based on growth constant at its pre-slowdown rate. With the circles in it simulates the poverty/G.D.P. But Professor Danziger shows that’s not the problem, as the line growth slowed down some in the 1970s, and some analysts back then blamed the slowdown for this uncoupling from poverty trends. growth, you would have concluded that poverty ended at some point in the mid-1980s, which … um … didn’t happen. And he finds that overall economic growth was pretty much all you needed to predict the poverty rate from the late 1950s to the mid-’60s.Īfter that, however, if you based your poverty prediction on G.D.P. Professor Danziger does something very simple here: he predicts poverty rates based solely on real growth in gross domestic product It helps get at the underlying relationship between poverty and inequality. This chart below by the poverty scholar Sheldon Danziger has a few moving parts to it, but I think To higher poverty” - which sounds a bit cryptic, I grant you). Many commenters, however, seemed suspicious of this link between poverty and inequality, and as I look back at much at what’sīeen written, my own piece included, I see it was left largely unexplained (I wrote that “by steering any given level of economic growth away from the low-income families,” higher inequality “leads Perspectives from expert contributors.Many War on Poverty analyses, including my own, invoked increased inequalityĪs a factor keeping poverty rates higher today than would otherwise be the case.
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