The strange rush to declare the end of inequality

The "we solved inequality" crowd is delusional

Celebrating the end of income inequality may be premature. (Photo by Emmanuel Dunand/AFP via Getty Images)

Income inequality is one of the dominant economic narratives of our time. However, between 2012 and 2022, the United States underwent a significant wage compression — wages at the bottom grew at a faster rate than wages at the top. From roughly 1980 to 2012, the top 10% had pulled away from the rest, and then from 2020 to 2022, between a quarter and a third of that was reversed.

So, have we solved economic inequality? Should we consign that narrative to the dustbin of history? Some certainly think so: “The world changes faster than the stories we tell ourselves,” wrote economist Cameron Murray about this development.

Prominent pollster David Shor wrote that he thinks “it’s pretty interesting that we saw massive wage compression from 2014 to 2024 and outside of a handful of economists, [approximately] zero people who claimed to care about inequality noticed or cared.” Economics pundit Noah Smith echoed Shor’s opinion, adding that the inequality discourse in America is really about “downwardly mobile educated people resentful about not being millionaires” and “petty millionaires resentful of the social status of billionaires.”

The implicit charge here is that those of us concerned about income inequality should be celebrating — or at least openly recognizing — this reversal of fortunes. And our silence is evidence that our animating concern is not egalitarian politics but hatred of high-income people.

Yet another argument emerging as a response to the recent wage compression is that it may have been the cause of all the “bad vibes.” From 2021 to 2024, economists noted that consumer sentiment — as measured by the University of Michigan’s Index of Consumer Sentiment — should have been 13 points higher. That is, given where inflation, unemployment, stock returns, and consumption were, one would have expected people to feel better than they told pollsters they did.

Matt Yglesias and others, like New York City Council policy analyst Alex Yablon, posited that perhaps people were actually mad that the goods and services provided by low-wage labor became more expensive because of rising wages for lower-income workers.

I think basically all of this analysis is confused and wrong.