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From the Wikipedia page

"The rich get richer and the poor get poorer" is a catchphrase and proverb, frequently used (with variations in wording) in discussing economic inequality. Its most common use is as a synopsis of a socialist criticism of the free market system (Capitalism), implying the inevitability of what Karl Marx called the Law of Increasing Poverty.

Was Karl Marx correct, do the rich get richer and the poor get poorer?

Is this true in the USA, for example?

user1873
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  • It's called the vicious circle, if I remember correctly. Edit: http://en.wikipedia.org/wiki/Virtuous_circle_and_vicious_circle#Vicious_circle – Some Guy Jun 16 '12 at 12:29
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    Did Marx actually make any predictions for the U.S. economy? – Joel Cornett Jun 16 '12 at 15:52
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    @JoelCornett, I am not sure. He probably just spoke about Capitalism in general. "The Rich get richer, ..." is a common idiom though, that many people believe to be true. The U.S. is usually touted as having the biggest gaps in income between CEOs and the 99% (as opposed to Sweden and other countries that rate lower on the Gini index), so I thought that using the USA as a counter example to **the rich always get richer, and the poor always get poorer** was a good idea. Do you think I need a quote from Marx? – user1873 Jun 16 '12 at 16:24
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    Note that observing changes in the relative wealth of the quintiles (for instance) isn't enough to back up such a claim unless you can also show that there is negligible (or at least severely limited) churn between the quintiles. – dmckee --- ex-moderator kitten Jun 16 '12 at 17:58
  • Note that there are two measures of poverty, absolute and relative. With the relative being defined as income below 60% of average. In rich, well developed countries it's bit ridiculous, classifies lot of people who are quite well off, as living in poverty. – vartec Jun 18 '12 at 14:32
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    The rich get richer, and the poor get relatively poorer compared to the rich. – jjack Sep 28 '15 at 17:35
  • Thomas Sowell loves to talk about this. I think he brings it up in "Discriminations and Disparities" (book) in particular, iirc. Saying the rich get richer is not quite accurate because "the rich" changes rapidly. The upper bounds gets higher but the top players today may be obscure in 20 years, and vice versa. There's a lot of churn at all levels. "The poor" aren't the same people decade after decade, either. – JamieB Dec 19 '22 at 19:07

1 Answers1

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Everyone gets Richer.

Growth in Real After-Tax Income from 1979-2007

Real Dollars 1979-2007

CBO finds that, between 1979 and 2007, income grew by:

  • 275 percent for the top 1 percent of households,

  • 65 percent for the next 19 percent,

  • Just under 40 percent for the next 60 percent, and

  • 18 percent for the bottom 20 percent.

But, you might say that the "gap" increased. Unfortunately, these numbers don't take into account individual people who might be rich, they only look at the group as a whole. The people who make up that group change over time. If you are rich/poor one year, it doesn't follow that you will continue to be so the next year.

It isn't true of individuals over time.

IndividualsQuintile-Distribtion

The table shows a high degree of income mobility over this period. Nearly 58 percent of households (i.e., 57.6 = 100 – 42.4) in the lowest income quintile in 1996 had moved to a higher quintile by 2005.

Middle-income taxpayers also did well with respect to mobility across income quintiles in the population. A much larger portion moved up to a higher income quintile (42.1 percent = 29.6 +12.5) than dropped to a lower quintile (24.6 percent = 7.1 +17.5).

The mobility of the top 1 percent of the income distribution is also important. More than half (57.4 percent = 100 – 42.6) of the top 1 percent of households in 1996 had dropped to a lower income group by 2005

It isn't true between generations.

Parent-Child Income Quintile

Since the transition rates in Figure 1 showed that 33.5 percent remained in the bottom quintile, that implies that 66.5 percent (100 – 33.5 = 66.5) exceeded the bottom quintile, as shown in Table 1.

... 38 percent of those whose parents were in the top income quintile remain in the top quintile.

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user1873
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    Interesting point about the transition rates. I never would have guessed that. – Joel Cornett Jun 16 '12 at 15:58
  • This page has an interesting tab on income mobility if you want to incorporate it: http://www.nytimes.com/packages/html/national/20050515_CLASS_GRAPHIC/index_01.html – JasonR Jun 18 '12 at 19:10
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    -1, The first point, "everyone gets richer", is false since they don't take the inflation into account. The [Congressional Budget Office](http://www.cbo.gov/publication/42729) reports an inflation between 1979-2007 of 185%. Therefore, only the top 1% seemed to get richer. I will remove the -1 if I missed the inflation factor (or the answer). – Zenon Jun 19 '12 at 02:20
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    @Zenon: "Real income" generally indicates that the figures have already been inflation adjusted, and indeed the "Document" link on [the CBO page](http://www.cbo.gov/publication/42729) leads to a PDF that says *"Income is adjusted for inflation using the Bureau of Labor Statistics’ research series of the consumer price index for all urban consumers (CPI-U-RS)."* – dmckee --- ex-moderator kitten Jun 19 '12 at 02:42
  • @dmckee damn, I'm really sorry, didn't saw the links on the top left... they are quite interesting! Although, I wonder how the last 5 years changed all that. – Zenon Jun 19 '12 at 02:56
  • Whether or not your numbers are inflation-adjusted is extremely important to the questions, perhaps you could note in the answer that numbers are adjusted for inflation? – Bjarke Freund-Hansen Jul 21 '15 at 12:15
  • If it's true for the statistic, then it's also true for most of the individuals. If not, then where would the statistic come from? – jjack Jul 21 '15 at 17:40
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    @BjarkeFreund-Hansen, "real" dollars are inflation adjusted by definition. – user1873 Jul 22 '15 at 02:59
  • You're using an overly simplistic definition of 'richer' – dtanders Aug 10 '15 at 21:54
  • @dtanders, "richer" means more real income than you previously received year-over-year. If you don't like my simple definition, what more complex definition would you use? – user1873 Aug 11 '15 at 15:50
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    @user1837 Yearly wages don't necessarily imply wealth. I'd want to compare value of accumulated assets less liabilities. A retired couple living in an expensive house they own is far 'richer' than a married couple living in a house of the same value that they just started paying the mortgage on, even though the former has no (or possibly negative) income, for example. – dtanders Aug 12 '15 at 21:37
  • @dtanders, I suppose that Marx could have been referring to wealth rather than income. If he was though, he does have an issue that you point out. The older you get, he wealthier you get. ("the old get richer and the young get poorer") – user1873 Aug 13 '15 at 15:05
  • Though I commend your use of cited data, your conclusions are incorrect. Maybe this is due to unintentional cherry picking, but there are glaring flaws with your conclusions. Firstly, CBO even says itself that comparing household wealth would be a better judge than income of economic circumstance, and that it does not attempt to work cost of living into its analysis. Therefore, to a large extent the data on income is meaningless because there is no data on how living expenses have changed for each bracket over the same period. –  Jan 05 '18 at 15:58
  • Secondly, the treasury data is using a very weird timeframe. 1996 to 2005. This was the boom era when everyone could get mortgages, and before the Great Recession in late 2007. It is beginning to feel like you're cherry picking time scales to suit the argument. To claim this data justifies "for individuals over time" is both too short a time span and is selecting the best available time span to suit your conclusion. It is very unlikely to be representative. What happened to those who moved up the ladder after the recession? I doubt it's a fairy tale ending. –  Jan 05 '18 at 16:04
  • Thirdly, the "intergenerational" analysis is too short term. It discusses difference between child and parent income, and the supporting link is broken so I can't see if it goes any deeper. Contrast this with [Chris Mueller's answer here](https://politics.stackexchange.com/questions/2697/long-term-studies-on-class-mobility), citing research mentioned in The Economist, which concludes that it takes 10-15 generations for family wealth to no longer be an advantage to status. Your research does not go anywhere near that depth. Thus, it is unlikely the answer will be a simple yes or no. –  Jan 05 '18 at 16:13
  • In conclusion: income is a potentially meaningless measure of whether someone is rich or not; it must be compared with wealth, and living costs, to be meaningful. I've even read about people in the top 1% of earners who live paycheque to paycheque because their costs match their income, thus they do not generate wealth to be passed on. Intergenerational analysis needs to cover a much longer time frame, as does an analysis of wealth over an individual's lifespan. Because of all this I'm voting down the answer, sorry. –  Jan 05 '18 at 16:25
  • Most of this data seems pretty meaningless for the claim. The taxable income is probably not a good predictor for wealth. Does it even include capital gain? It would be much more interesting to see the second figure for wealth. (But I guess that data is not available.) – Kvothe Jun 10 '21 at 08:21