This paper focuses on the implications of inequality trends in the U.S., Canada
and Mexico over the last thirty years. It starts from the perspective that it is
increasing economic inequality, and its implications, which primarily concerns
us — partly because we know that although some countries (like the U.S.) have
experienced several recent decades of rising inequality, continually increasing
inequality cannot be a steady state.
This paper emphasizes the implications of trends in top end incomes in the U.S.
and Canada — specifically, the top 1%. In focusing on the very top end, this paper
concurs with Gordon (2009) and Burkhauser et al. (2009) who find that essentially
all of the increase of inequality after 1993 in the U.S. occurred in the top 1 percent
group, and there was nil increase of inequality in the bottom 99 percent of the population.
Osberg (2008) had earlier come to a similar conclusion in Canada.
As is well-known, Canada, Mexico and the United States are countries of very
different size, income level and socio-demographic structure — Table 1 provides a
few summary comparative statistics — so the context of income inequality differs
substantially across these three countries. Furthermore, this paper adopts a slightly
different perspective from much of the literature in focusing on the implications of
increasing inequality — i.e. changes over time. In this respect, it diverges from the
approach of the many authors (e.g. Wilkinson and Pickett: 2009) who have compared
societies with different levels of inequality. A necessary and sufficient condition for
increasing cross-sectional inequality is differential rate of growth of real incomes at
different points in the income distribution. Hence, this paper emphasizes the very
different rates of growth of income among the bottom 99% and top 1% in the U.S.
and Canada. Many interesting papers have discussed why this might be happening
but this paper does not have the space to do this debate justice, and focuses instead
mainly on implications.