Chart of the Day: Consumption Inequality and Income Inequality Have Both Skyrocketed

Fight disinformation. Get a daily recap of the facts that matter. Sign up for the free Mother Jones newsletter.

One of the evergreen arguments in the debate over rising income inequality is that what really matters isn’t income, it’s consumption. And consumption inequality hasn’t been rising all that fast. If you measure what people are actually buying, it turns out that the middle class is doing OK.

To the extent that this was true, it was partly thanks to the fact that the middle class was borrowing ever greater amounts in order to support its consumption habits. But that couldn’t last forever. In 2008 all that borrowing came crashing to the ground — taking consumption along with it — and we learned once again that income matters after all. But yesterday Matt Yglesias pointed to a recent paper that adds a whole new dimension to this dispute: the authors (Orazio Attanasio, Erik Hurst, and Luigi Pistaferri) contend that when you correct for well-known problems in the consumption data, consumption inequality has been rising about as fast as income inequality. All the old arguments were just based on faulty data.

The charts below tell the story. They rely on survey data from the Panel Study of Income Dynamics, and for each year from 1980 through 2010 they measure the standard deviation of log income and log consumption. (Why use logs? Beats me, but apparently it’s standard practice for this kind of thing.) Standard deviation, of course, is just a measure of dispersion. The bigger the number, the farther apart the highs and lows are from the mean.

The top chart shows the growth of income inequality: it’s gone up from about .75 to .95, an increase of .2 units. The bottom chart shows the growth of various corrected measures of consumption inequality. The broadest measures are the two top ones, which have gone up from about .8 to 1.05, an increase of .25 units. Or, as the authors put it, “Taken together, the results from the PSID data [] is that consumption inequality and income inequality tracked each other nearly identically during this time period.”

If this is all true, it means that consumption tracks income pretty well, and both have become steadily more unequal over the past three decades. Surprised?

HERE ARE THE FACTS:

Our fall fundraising drive is off to a rough start, and we very much need to raise $250,000 in the next couple of weeks. If you value the journalism you get from Mother Jones, please help us do it with a donation today.

As we wrote over the summer, traffic has been down at Mother Jones and a lot of sites with many people thinking news is less important now that Donald Trump is no longer president. But if you're reading this, you're not one of those people, and we're hoping we can rally support from folks like you who really get why our reporting matters right now. And that's how it's always worked: For 45 years now, a relatively small group of readers (compared to everyone we reach) who pitch in from time to time has allowed Mother Jones to do the type of journalism the moment demands and keep it free for everyone else.

Please pitch in with a donation during our fall fundraising drive if you can. We can't afford to come up short, and there's still a long way to go by November 5.

payment methods

ONE MORE QUICK THING:

Our fall fundraising drive is off to a rough start, and we very much need to raise $250,000 in the next couple of weeks. If you value the journalism you get from Mother Jones, please help us do it with a donation today.

As we wrote over the summer, traffic has been down at Mother Jones and a lot of sites with many people thinking news is less important now that Donald Trump is no longer president. But if you're reading this, you're not one of those people, and we're hoping we can rally support from folks like you who really get why our reporting matters right now. And that's how it's always worked: For 45 years now, a relatively small group of readers (compared to everyone we reach) who pitch in from time to time has allowed Mother Jones to do the type of journalism the moment demands and keep it free for everyone else.

Please pitch in with a donation during our fall fundraising drive if you can. We can't afford to come up short, and there's still a long way to go by November 5.

payment methods

We Recommend

Latest

Sign up for our free newsletter

Subscribe to the Mother Jones Daily to have our top stories delivered directly to your inbox.

Get our award-winning magazine

Save big on a full year of investigations, ideas, and insights.

Subscribe

Support our journalism

Help Mother Jones' reporters dig deep with a tax-deductible donation.

Donate