After 1975 did incomes grow faster for American families or French families?
Friday, September 2, 2011 at 02:07PM
Skeptic in Economics, Middle Class

It's a trick question. The top 1% of families did better in America than in France, but the bottom 99% of French families had faster income gains than the bottom 99% of American families, according to a recent paper by Atkinson, Piketty and Saez. (In the US, top 1% families had annual incomes above $398,900 in 2007.) Here, via Uwe Reinhardt in Economix blog, are the numbers:

Average real income per family in the United States grew by 32.2 percent from 1975 to 2006, while they grew only by 27.1 percent in France during the same period, showing that the macroeconomic performance in the United States was better than the French one during this period. Excluding the top percentile, average United States real incomes grew by only 17.9 percent during the period while average French real incomes — excluding the top percentile — still grew at much the same rate (26.4 percent) as for the whole French population. Therefore, the better macroeconomic performance of the United States and France is reversed when excluding the top 1 percent.

Reinhardt points out that this reversal of rank is due to the extreme skewing of US income gains to the top 1% in recent decades (a pattern also observed in other English-speaking nations, China, and India but not in Continental Europe).

Consider now the longest period featured in their Table 1, from 1976 to 2007. The authors estimate that over that period the average annual income of all families in the United States grew at an average annual compound growth rate of 1.2 percent. But the data reveal that for the top 1 percent of income recipients, average real income grew by 4.4 percent a year. They captured 58 percent of the growth in total income over the period.

By contrast, for the bottom 99 percent of Americans, average family income over the same period grew by only by only 0.6 percent a year. Within that broad 99 percent, however, some lower-income groups probably saw their real income fall. 

The next time somebody says US economic policies are superior to French economic policies, what do you say?

Update on Sunday, September 4, 2011 at 02:13PM by Registered CommenterSkeptic

Robert Reich in today's NYT:

While Americans’ average hourly pay has risen only 6 percent since 1985, adjusted for inflation, German workers’ pay has risen almost 30 percent. At the same time, the top 1 percent of German households now take home about 11 percent of all income — about the same as in 1970.

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