A New York State of Inequality

The New York based Fiscal Policy Insitute has a great new report (pdf) out on rising economic inequality in New York state and New York City. The FPI researchers have used state income tax data to do a state-level analysis of income concentration, modeled on the path-breaking research by Thomas Piketty and Emmanuel Saez, who used IRS data to look at national income inequality in the United States from 1913 to the present.

Here are just a few highlights. First, over the last 30 years, economic inequality increased more rapidly in New York state than it did in the economy as a whole, and more rapidly in New York City than it did in New York state.

Share of top 1 percent in total income, US, NYS, NYC

Source: Fiscal Policy Institute.

Second, the middle and the bottom saw their share of total New York City income plummet since 1990.

Income shares, NYC, 1990 and 2007

Source: Fiscal Policy Institute.

Third, the increase in income inequality in the United States far outpaced what has happened in other rich economies.

Share of top 1% in total national income, various rich countries

Source: Fiscal Policy Institute.

I particularly like that the report attributes the rise in economic inequality primarily to political processes. FPI specifically rejects the standard economic explanation for rising inequality –a “skills shortage” that drives up wages of highly skilled workers at the top. “Among the well educated, too, there is an enormous degree of income polarization,” they write. “Those with the highest incomes do not simply have the best education. Something else must be at work since education, however important on an individual level, simply cannot serve as a compelling explanation for increased income concentration.” (p. 18)

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