Income Inequality and Economic Exclusion

• In Event: Poverty

Abstract

Income inequality has risen dramatically in the United States over the last 40 years. This has been accompanied by a growing concern that many people are being economically "left behind." Yet standard measures of the proportion of people who left out of the economy, such as the absolute and relative poverty rates, have not increased during this time. I argue that this discrepancy arises because standard poverty measures are poorly equipped to identify the full extent of economic exclusion generated by today's economy. In particular, because they focus only on the bottom and middle of the income distribution, these measures cannot measure the consequences of income concentration among the rich, and the reorientation of the economy to meet the needs of high-income consumers that follows. I propose a measure of economic exclusion, benchmarked to the income at which the median dollar is earned rather than that of the median person, that is sensitive to these developments. Trends in economic exclusion as defined by this measure diverge sharply from trends in poverty over the last 40 years, showing much larger increases in economic exclusion over time.

Author

• Robert Allen Manduca, University of Michigan-Ann Arbor