The rich get richer, the poor get poorer, and the middle class remains stagnant. That’s the story often told by those who complain about inequality in America. But is it true? Has economic progress in America been shared widely or captured by only the rich?
As economist Russ Roberts explains, the standard story of stagnating wages takes snapshots of one set of people in the past and compares them to an entirely different set of people in the present. But when you follow the same people over time, it becomes clear that the poor and the middle class are prospering, often gaining more than the richest Americans.
The bottom line, as Roberts explains in the video, is that people across the economy have been getting raises and they’re pretty large:
Of course it’s not all sunshine even when you follow the same people over time. Not everyone has an equal chance to get to the top—in all of these studies, the richest Americans were still sitting pretty as time passed. People from all parts of the income distribution are getting ahead. But they don’t easily get ahead of people who start out ahead of them.
And these results don’t justify the status quo. There’s plenty to fix. Too many cronies get special treatment from the government and there’s too little opportunity for the least skilled among us. You can still argue that there’s too much inequality if that’s your concern.
But the economy isn’t rigged to favor just the rich. The poor and the middle class have made progress. The death of the American dream is greatly exaggerated.