Income inequality in the USA
The Economist carries a short feature on the scale of income inequality in the USA and finds that a quarter of America’s total income is earned by the top 1% of the population.
“The concentration of income earned by this top percentile now stands at its highest since 1928. Two-thirds of the country’s total gains in the five years to 2007 accrued to the top 1%, whereas the bottom 90th percentile saw only 12% of the extra income.”
We have been looking at income inequality as part of our study on measuring the standard of living. Wikipedia carries up to date information on measures such as the Gini coefficient for countries where the relevant data is available.
Marx and the labour theory of value
The latest extract from Edmund Conway’s new book “50 Economic Ideas” looks at the work of Karl Marx and in particular the validity of his labour theory of value
“At the heart of Marx’s theories was the labour theory of value. This idea, laid out in Das Kapital (1867), states that a commodity is worth the amount of time it takes for someone to make it. So, for instance, a jacket that takes twice as long as a pair of trousers to stitch and sew ought to be worth twice as much. However, he argued, those who ran companies pocketed disproportionate amounts of the profits themselves. The reason bosses get away with this, Marx argued, is that they own the means of production and so are able to exploit their workers.There are question marks over how well the labour theory of value holds up. However, the broad thrust remains undiminished: that there is a major divide between the wealth and opportunity of those who own land and capital and of those who do not.”
The rest of the article can be found here
Unjust rewards?
Polly Toynbee and David Walker from the Guardian have a new book out this week - available on Amazon - which looks at the depth of inequality in modern Britain.
“The top 10% of income earners get 27.3% of the cake, while the bottom 10% get just 2.6%. Twenty years ago the average chief executive of a FTSE 100 company earned 17 times the average employee’s pay; now it is more than 75 times. Since Labour came to power in 1997 the proportion of personal wealth held by the top 10% has swelled from 47% to 54%.”
A gross income of just under £40,000 is sufficient to get you into the top decile of the income distribution (making an adjustment for household size). The book will be a timely reminder that - eleven years into a Labour government committed to a mild form of redistribution through policies such as New Deal, tax credits and the minimum wage, there are incredibly powerful forces that drive inequality higher in modern economies. One way of measuring income inequality is to use the gini coefficient - the latest figures for the UK are available here..
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