Is Inequality Growing as American Workers Fall Behind?
There Is A Wealth Gap Due To Falling Real Interest Rates Not Declining Compensation
By John A. Tatom
John A. Tatom is director of research at Networks Financial Institute and associate professor of Finance at Indiana State University. Formerly he was a visiting Professor at DePaul University, held a variety of positions at UBS in Zurich and Chicago, and was a research official at the Federal Reserve Bank of St. Louis. He holds a PhD from Texas A&M University. He is a past president of the St. Louis Gateway Chapter of the National Association for Business Economics.
This article looks at reasons why income inequality could rise and then explores whether, in fact, workers are losing out. It examines whether workers are falling behind relative to the wealthy and whether real wages have been falling or perhaps only manufacturing wages. It also examines whether there is a growing “wealth gap” and why it could be developing. Finally, it examines the hypothesis that relatively inexperienced or unskilled workers are falling behind. The paper concludes that there is a wealth gap, but that it is due to falling real interest rates not declining compensation. Other indicators of inequality may be growing as well, but it is not because compensation is falling short of rapid productivity growth or because workers are falling behind other income recipients.
