Michael Tanner

I am outraged. The City University of New York recently announced that it is going to pay Paul Krugman $225,000 for part-time work studying income inequality. If you add in his sundry speaking fees, Professor Krugman is solidly ensconced among the hated 1 percen

I too write about inequality, yet I am not being paid nearly as much. Of course, Professor Krugman does have that Nobel Prize thing going for him, but that hardly seems to justify such blatant inequality. So I have been waiting patiently for Professor Krugman to mail me a check to correct this unfair situation.

Or perhaps, instead, he has been busy lobbying for a taxpayer-funded program to subsidize underpaid inequality writers.

In reality, of course, Professor Krugman’s income has absolutely nothing to do with mine. Nor should it. This is not a zero-sum world. I don’t earn less because Krugman earns more.

There is no doubt that income inequality has increased in America. Even after adjusting for inflation, the income share of the top 1 percent of Americans rose by 201 percent from 1979 to 2010, compared to just 49 percent for the bottom 20 percent.

But just as Professor Krugman’s earnings are irrelevant to mine, the growing wealth of the super-rich tells us little about how the average American is really doing.

And it turns out we are doing pretty well.

First, we should recognize that, by and large, Americans at all income levels are better off than their parents were. A study by the Pew Charitable Trust and the Brookings Institution found that two-thirds of 40-year-old Americans are in households with larger incomes than their parents had at the same age, even taking into account the fact that the cost of living has risen.

In fact, the news is actually even better than that. The average household is smaller today than it was back then, meaning a household income has to cover fewer family members, leaving them better off than the bigger households of the past. A second Pew study found that when incomes are adjusted for household size, four out of five adults today are better off than their parents were at the same age.

Even the poor are doing comparatively well. As Robert Rector of the Heritage Foundation has pointed out, the poorest of Americans today enjoys luxuries that were beyond the reach of even the wealthy not so long ago. For example, 65 percent have a DVD player, 64 percent have cable or satellite television, and 31 percent have two or more cars.


Michael Tanner

Michael D. Tanner is a senior fellow at the Cato Institute, heading research into a variety of domestic policies with particular emphasis on health care reform, welfare policy, and Social Security. His most recent white paper, "Bad Medicine: A Guide to the Real Costs and Consequences of the New Health Care Law," provides a detailed examination of the Patient Protection and Affordable Care Act (Obamacare) and what it means to taxpayers, workers, physicians, and patients.