All social groups in the United States have returned to their pre-tax income levels within 20 months of the recession triggered by the COVID-19 pandemic, according to a working paper on real-time inequality monitoring published by the National Bureau. of Economic Research.
Real disposable income for the bottom half of earners was 20% higher in 2021 than in 2019 after accounting for taxes and cash transfers, although that figure has fallen this year due to the expansion of the Welfare state. canceled, according to the study released Monday by academics at the University of California, Berkeley. Thomas Blanchet, Emmanuel Saez, and Gabriel Zucman co-authored the working paper and published their findings online at realtimeinequality.org, offering what they said to their knowledge are the first statistics on the distribution of US national income by race and level of education.
“The recovery has been much more equal than the recovery from the Great Recession of 2008-09, when it took nearly 10 years for the bottom 50% to return to their pre-crisis pre-tax income levels. — even though GDP per adult has recovered in four years,” the study says. “The recovery from COVID has also been more equal across gender and racial groups.”
The recovery was driven primarily by job growth in a tight labor market rather than wage growth, which “highlights the equalizing effects of tight labor markets,” according to the study.
It’s impossible to truly know who benefits from real-time economic growth, largely because of the U.S. government’s lack of timely information on income distribution, the authors said in slides explaining the website. Internal Revenue Service processing times and late filings by high earners mean that income tax data is only available with a lag of nearly two years, creating “a major gap in United States economic statistics,” according to the study.
“These results illustrate that a given trajectory of GDP growth is consistent with vastly different market income dynamics for different social groups, underscoring the usefulness of timely distributional growth statistics,” the authors said.
The study’s methodology dates back precisely to 1976 and “combines all publicly available high-frequency data into a unified framework,” according to the study.
The authors began by using distribution data from the National Accounts created by Saez, Zucman and Thomas Piketty in 2018, which allocates all annual national income, household wealth “and many components of these macroeconomic aggregates using mostly individual tax data,” according to the study. .
The authors then created monthly files, resizing each component of the national income data to fit the frame with official monthly and quarterly surveys and household, employment and wage statistics, according to the study.
The authors compared these files to the current demographic survey — jointly sponsored by the U.S. Census Bureau and the U.S. Bureau of Labor Statistics — and the Federal Reserve’s survey of consumer finances, they said in the study.
Based on the authors’ knowledge, this allowed them to create “the first statistics on the distribution of national income by race and level of education,” the study says.
Race and education variables are “missing in tax data,” according to the study, but are included in the aforementioned surveys by federal government institutions. The framework also allowed the authors to plot high-frequency changes in employment, according to the study.
The study also indicates that labor incomes recorded significant gains at the bottom of the distribution “in the context of loose monetary policy” and a tight labor market.
“Government programs put in place during the pandemic led to an unprecedented – but short-lived – improvement in working-class living standards,” the study says.
However, “disposable income fell at the start of 2022, as the expansion of the welfare state enacted during the pandemic – for example, an expanded child tax credit and an earned income tax credit – was canceled,” the study said. “The only reason the disposable income of the bottom 50% was higher in 2022 than in 2019 (by about 10% in real terms) was the higher market income for this group, driven by wage gains .”
The authors did not immediately respond to a request for comment.
–Edited by Khalid Adad.
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