Sympathy for the top quintile
By Scott Sumner
Paul Krugman often seems more interested in the plight of the America working class than the welfare of much poorer residents of developing countries. For instance, he’s argued that lower immigration rates after the 1930s helped the American working class achieve major economic gains, and worries about unrestricted immigration.
That’s not to say that I, or most progressives, support open borders. You can see one important reason right there in the Baldizzi apartment: the photo of F.D.R. on the wall. The New Deal made America a vastly better place, yet it probably wouldn’t have been possible without the immigration restrictions that went into effect after World War I.
In a couple new pieces he almost seems to lament the fact that the bottom 80% of the global income distribution has been doing far better than most people in the top quintile.
What Mr. Milanovic shows is that income growth since the fall of the Berlin Wall has been a “twin peaks” story. Incomes have, of course, soared at the top, as the world’s elite becomes ever richer. But there have also been huge gains for what we might call the global middle — largely consisting of the rising middle classes of China and India.
And let’s be clear: Income growth in emerging nations has produced huge gains in human welfare, lifting hundreds of millions of people out of desperate poverty and giving them a chance for a better life.
Now for the bad news: Between these twin peaks — the ever-richer global elite and the rising Chinese middle class — lies what we might call the valley of despond: Incomes have grown slowly, if at all, for people around the 20th percentile of the world income distribution. Who are these people? Basically, the advanced-country working classes. And although Mr. Milanovic’s data only go up through 2008, we can be sure that this group has done even worse since then, wracked by the effects of high unemployment, stagnating wages, and austerity policies.
Furthermore, the travails of workers in rich countries are, in important ways, the flip side of the gains above and below them.
In fairness, Krugman clearly welcomes the gains of the lower 80%, and it’s hard to argue with his view that it would be nice if the working class were doing better. Nor does he come right out and say that these trends are bad. My comments reflect the way he frames these issues. Start with the comment about those at the “20th percentile.” Most people would describe those people as being at the “80th to 98th percentile” or being in the top 20% (but not the top 2%.) That would make the American working class seem much more like lucky duckies. The term ’20th percentile’ sounds much more depressing. Here’s a graph in one of his blog posts, which describes the data:
I’m not trying to criticize Krugman’s views in this post; the first piece I quoted from expresses mostly reasonable concerns about the welfare of working class people. Rather I’d remind you that Krugman often scolds conservatives for being heartless, mean-spirited ideologues. But conservative economists typically claim that they believe their proposals will help the lower classes. The progressive response is, “OK, but then why do you talk so much about ideas like tax cuts for the rich?” Fair enough, but then why does Krugman focus so much on the welfare of the top quintile, and so little on the welfare of the much poorer bottom 4 quintiles?
My point is this. If you (like me) are much more concerned about the problems faced by bottom 80 percent than the top 20 percent, then don’t be intimidated by Krugman’s scolding. You hold the moral high ground.