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Has the level of inequality in the US changed from the time of Franklin Roosevelt to...

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yaga49 | Valedictorian

Posted February 22, 2013 at 10:21 AM via web

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Has the level of inequality in the US changed from the time of Franklin Roosevelt to the present?

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

Posted February 22, 2013 at 2:58 PM (Answer #1)

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In the years after the start of the Great Depression, income inequality in the United States declined dramatically.  However, it has been rising since the late 1970s and is now higher than it was at the time that the Depression started.  We must note, however, that, while inequality may be slightly higher than in 1929, the incomes of the typical family in America (at every level of society) have increased dramatically in real terms since that time.  In addition, household wealth, as opposed to income, has become less unequal.

If we look simply at income, we find that inequality has indeed risen back to the levels of the pre-Depression years.  However, that does not tell the entire story.  It is also important to look at things like absolute standards of living and inequalities in wealth.  While income inequality is important, wealth inequality is important too.  Wealth inequality has actually dropped since Roosevelt’s day.  What this tell us is that the highest levels of society may make much more in pre-tax income, but the rest of us have caught up in terms of how much we have in terms of savings and investments.

It is also important to look at absolute statistics, not just relative ones.  While there is more income inequality, the average household makes much more money (in constant, real dollars) than it did in 1929.  What this means is that the average American household today is much better off than it was in 1929.  We can see this if we just think anecdotally about what Americans can afford.  Today, even people who are by no means rich do things like going to Hawaii on vacation or going on cruises.  The latest in electronic technology is available to people up and down the economic ladder.

The point is that the story is more complicated than just income inequality.  Income inequality has clearly grown, but wealth inequality has not grown.  In addition, the lifestyles of average Americans today are much more luxurious than they were in 1929.

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