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

Let our journalists help you make sense of the noise: Subscribe to the Mother Jones Daily newsletter and get a recap of news that matters.

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?

SIX TRUTHS

Reclaiming power from those who abuse it often starts with telling the truth. And in "This Is How Authoritarians Get Defeated," MoJo's Monika Bauerlein unpacks six truths to remember during the homestretch of an election where democracy, truth, and decency are on the line.

Truth #1: The chaos is the point.

Truth #2: Team Reality is bigger than it seems.

Truth #3: Facebook owns this.

Truth #4: When we go to work, we're in the fight.

Truth #5: It's about minority rule.

Truth #6: The only thing that can save us is…us.

Please take a moment to see how all these truths add up, because what happens in the weeks and months ahead will reverberate for at least a generation and we better be prepared.

And if you think journalism like Mother Jones'—that calls it like it is, that will never acquiesce to power, that looks where others don't—can help guide us through this historic, high-stakes moment, and you're able to right now, please help us reach our $350,000 goal by October 31 with a donation today. It's all hands on deck for democracy.

payment methods

SIX TRUTHS

Reclaiming power from those who abuse it often starts with telling the truth. And in "This Is How Authoritarians Get Defeated," MoJo's Monika Bauerlein unpacks six truths to remember during the homestretch of an election where democracy, truth, and decency are on the line.

Truth #1: The chaos is the point.

Truth #2: Team Reality is bigger than it seems.

Truth #3: Facebook owns this.

Truth #4: When we go to work, we're in the fight.

Truth #5: It's about minority rule.

Truth #6: The only thing that can save us is…us.

Please take a moment to see how all these truths add up, because what happens in the weeks and months ahead will reverberate for at least a generation and we better be prepared.

And if you think journalism like Mother Jones'—that calls it like it is, that will never acquiesce to power, that looks where others don't—can help guide us through this historic, high-stakes moment, and you're able to right now, please help us reach our $350,000 goal by October 31 with a donation today. It's all hands on deck for democracy.

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