The Party of Income Inequality Is?

The Democratic Party!  For all of its huffing and puffing that it is the party of income equality, the Democratic Party has political control of by far the most areas of the US with high income inequality.  That party likes to claim that the middle class and low wage industry workers have been left behind in income growth over the years.  Let us look at a very interesting graph of the income growth in high wage, middle wage, and low wage industries since 2007:

The high wage industries wage growth over the years from 2007 into 2019 has been relatively steady.  The middle wage industries pay growth had some significant dips in 2010 and 2014 under Obama’s administration.  The low wage industry wage growth rate hit lower rates of increase in 2010 and 2012 under Obama.  The Democrats will point out that after that low in 2012, the low wage industry wage growth began to get better until it was about the same rate of growth as that of the high wage industry wage growth rate in 2014.  By 2015, the wage growth rates were pretty close for all three industry groups.  However, in early 2018 wage growth for the low wage industries took off, achieving far faster rates of growth compared to the middle and high wage industry wage growth rates.  Apparently, the economic policies of the Trump administration are quite favorable to wage growth on the part of the low wage industries.

So, just as those areas of the country represented by Republicans in Congress tend to have less income inequality, Republican economic policies under Trump are enabling low wage earners to catch up with higher wage earners while in many of the years under Obama they were falling behind more and more.

Michael Strain of AEI notes that the median wages of all workers increased by 25% over the past 30 years corrected for inflation.  The wages of the poorest paid 20% of workers grew by more than one-third.  The poorest paid workers have actually been catching up in wage income therefore.  Income inequality has decreased.  Applying a broader income measure that takes into account income from fringe benefits, capital gains and dividends, Social Security, Medicaid and Medicare benefits, unemployment insurance, food stamps, and federal tax payments, this reduction of total income inequality remains substantial.  The median household income by this measure increased by 43% from 1990 to 2015.  In comparison, the households in the bottom 20% had an increase in income of 62%.  As the American economy has grown since 1990, the bottom 20% of households on the total income scale have benefited even more than the median household has.

The common claim of the Democrat Party that the poor and the middle class are falling behind and somehow suffering does not hold up.  It is true that they could have benefited more had government policies been different.  The economy overall could have grown more rapidly with policies more friendly to the free, voluntary private sector.  Had that extra growth path been chosen, median and poorer households would have had greater increases in income.  We see evidence of how that would have been the case in the recent surge in income of the low wage industries under the Trump administration with its decreased cost of regulations, its signalling of fewer arbitrary and expensive future regulations, and its tax cuts favoring business investments to increase business productivity.  The Obama regulatory chaos and extreme uncertainty with a will to wipe out entire industries, much like Franklin D. Roosevelt’s capricious federal management of the economy that greatly prolonged the Great Depression and the later uncertainty caused by LBJ, Nixon, and Carter offer lessons in how to slow economic growth and with it to deny most of us the benefits of an improved standard of living relative to what the Democrats will generally allow us.

The free markets of a Capitalist society unleashed would benefit most Americans greatly and that would most definitely include most low wage Americans!