Money & Politics with Jim Pethokoukis
Episode 6: Richard Burkhauser on Inequality

Guest: Richard Burkhauser, economics professor at Cornell University
Dec 6, 2012
Direct Link to MP3 File

On this week’s Ricochet Money & Politics Podcast, Jim’s guest is Richard Burkhauser, economics professor at Cornell University. Prof. Burkhauser and his team at Cornell have done some amazing research that gives a much different perspective on the issue of income inequality. The mainstream media opinion holds that middle-class income have gone nowhere for 30 years while the income gap between the rich and everybody else has widened.

Underlying that thesis is the work of two economists, Thomas Piketty and Emmanuel Saez. According to them, median American incomes, adjusted for inflation, rose just 3.2% from 1979 through 2007.

But it’s just not true, according to Burkhauser. He finds that median household income – properly measured – rose 36.7%, not 3.2% as Piketty and Saez argue.

(Click images below to view in larger size) 

  1. Richard

    It has been a while since I have seen one of these, I look forward to hearing it. 

  2. Garrett Petersen

    When I started listening to this, I thought, “Hm.  This seems remarkably familiar.”  Then I remembered that Richard Burkhauser was on the Econ Talk podcast talking with Russ Roberts about this topic.

    I sure hope more people are listening to what Burkhauser has to say.  Those misleading stats from Piketty and Saez are quoted far too often and with far too much certainty.

  3. Rachel Lu
    C

    First of all, I really like this podcast, so thanks for that! 

    Now, here’s the thing that I find interesting about Burkhauser’s analysis. He suggests that, despite relatively stagnant wages, the middle class really is better off when we account for 1) the increase in wage earners per household, 2) the decrease in heads per household, and 3) government benefits.

    What that probably amounts to is that families are better off insofar as both parents are working, and they’re having less kids and drawing more benefits. But those are all social trends that conservatives mostly lament! So, insofar as you’s like to see more kids, more full-time parents and less dependency on government benefits, perhaps you should join the NYT in bemoaning middle class wage stagnation?

  4. Donald Todd

    Probably because it does not belong in the podcast, but because it does belong in any consideration of “wealth” it should be noted that, at least where a lot of technology exists, the price of that technology is going down.  Cellphones, flat screen televisions, digital cameras, and a lot of the technology purchased for use in or by households has become less and less expensive.  In that consideration, the household dollar goes further.

    It is not a tax question, but it is a wealth question.

  5. Rachel Lu
    C

    You’ve hit one of my little pet peeves, Donald. :) Whenever people get on this topic someone always points out that hooray, the technology is cheaper! Yes, indeed it is. But technology isn’t the only thing you need in life, and other things (health care, higher education) are more expensive, so it’s not obvious that that comes out to a win.

  6. Chris Campion

    Great podcast.  It made me forget how cold it was on my run.

    The problem, as always, is making this type of information digestible to a largely uninterested crowd of people.  That’s why the idea that the middle class is worse off and the “rich” are going gangbusters has gotten traction – because it’s being repeated, and repeated, etc., and it’s an easy thing to latch onto and say “Yeah, that seems true”.

    Of course, the same people who say “Yeah, that seems true”, are the ones either on the growing entitlement teat, or they’re assuaging guilt over their earnings with a “let the rich pay more” worldview.  Both of these people (broad brush alert) are in a full-on retreat from reality, and that needs to be pointed out to them – repeatedly.  Loudly.  Painfully, if need be.

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