The Great Recession exacted a huge toll on people in every income group, and recovering from it has been a long and grueling process.
To some economists, the recovery has exacerbated the very real trend toward income inequality in the United States. French economist Thomas Piketty has noted that between 2009 and 2012 incomes have grown, but almost all of those gains have gone to the wealthiest 1 percent.
It’s a claim that has been repeated often, but Steven Rose of George Washington University says it needs to be put in perspective.
“Looking at this little spike between 2009 and 2012, and making a big deal of it, in my mind, is game-playing,” says Rose, author of a new report on the issue.
The wealthy did indeed reap most of the income gains between 2009 and 2012, Rose says, but only if you include capital gains like stock sales — which can be misleading.
Rose says rich people made a lot of money in the stock market after 2009, but much of that was simply making up ground lost in the even bigger hit they took in 2008. What looks like income growth, he says, is simply a rebound from their earlier losses.
“From 2007 to 2013, average incomes are down by about 10, 12 percent,” Rose says, “but the incomes of the top 1 percent are down by nearly 30 percent.”
Rose says something else often is forgotten when talking about the years after the Great Recession: Working- and middle-class people lost income during the period, but some of it was offset by what are called government transfers — food stamps and unemployment compensation.
He says that it also is clear some of the policies put in place by the Obama administration, including the payroll tax cut, actually have had positive impacts on people’s incomes — and that this has been overlooked when economists like Piketty calculate people’s income.
Dean Baker of the liberal Center for Economic and Policy Research says that these are all valid points but income inequality remains a big problem. Baker says that since 1980 or so, a substantial amount of income growth has gone to people at the very top of the economic ladder.
“I don’t think it’s any doubt that there’s been very small gains to those at the middle,” he says, “and those at the top have really been, disproportionately, the beneficiaries of growth.”
Rose doesn’t deny that inequality is a problem and says he isn’t trying to make the case that it’s getting any better. But he says people on both sides of the political spectrum need to understand what really happened during the recession and in the years that followed.