This isn’t going to come as any big surprise, I think, but it turns out that the growth in income inequality over the past 25 years is permanent. A team of researchers sampled tax data going back to 1987 and calculated the variance in earnings between high and low earners. Then they broke that variance into two components: permanent and transitory. This is pretty much exactly what it sounds like. “Transitory” refers to income changes from year to year, for example from increased social mobility as people move up and down the job ladder. Permanent means….permanent. Folks already at the top are just raking in more money.
In any case, the results varied slightly depending on which model they used and what units they studied (individuals vs. households), but the results didn’t vary much. As the chart below shows, basically all of the increase in variance was permanent. Transitory changes in income inequality have changed not a whit since 1987. The rich are getting richer, and they’re staying richer.
