Why U.S. Income Inequality Is More Frightening Than Europe's

By Jordan Weissmann

Income inequality is not a uniquely American problem. Over the past 30 years, it's surged across the developed world, driven by everything from the insane wealth generated by big finance to the victory of computers (and offshoring) over blue-collar labor.  

That said, there's a case to be made that U.S. income inequality is in fact exceptional, and not just because of its severity. I was reminded of that last night, when I saw this graphic from a 2008 report by the OECD making its way around Twitter. In broad terms, what it tells us is that in many developed countries, a rising tide has truly lifted all boats, with the wealthy rising a bit faster. In the United States, the tide is lifting up the rich, while drowning many of the poor. 

The chart shows the average annual rate at which earnings rose for full-time working men (in dark blue) and women (in light blue) in each 10 percent bracket from 1980 to 2005. So the poorest men and women are on the left of each chart, and the richest are on the right.

OECD_Global_Income_Gains.png

Like their peers across the developed world, American women's earnings rose as they broke into the labor force -- though less so for lower-income women. For American men, it was a different story. Among the upper-middle-class and rich, male earnings inched up on the whole. Among the lower-middle class and poor, their incomes shrank. The only other country that saw a similar phenomenon was Canada, where incomes seemed to stagnate in general.*

That's what's so frightening about the way the U.S. economy was changing even before the Great Recession. It's not just that the rich saw their finances improve faster than everyone else's. It's that many Americans were seeing the value of their work, and in some cases their standard of living, decline. And that makes us at least a little bit special, in a very unfortunate way.

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*A necessary caveat: this chart doesn't cover part-time workers, and their inclusion might affect Europe's statistics more than America's. But the changes to full-time workers' earnings are important on their own terms.

This article available online at:

http://www.theatlantic.com/business/archive/2013/01/why-us-income-inequality-is-more-frightening-than-europes/272529/