Occasional Reason contributer Tyler Cowen thinks about income inequality over at the New York Times. One of his conclusions: Blame it on the old and the college graduates--two groups with a lot to answer for:
Much of the measured growth in income inequality has resulted from natural demographic trends. In general, there is more income inequality among older populations than among younger populations, if only because older people have had more time to experience rising or falling fortunes.
Furthermore, more-educated groups show greater income inequality than less-educated groups. Uneducated people are more likely to be clustered in a tight range of relatively low incomes. But the educated will include a greater range of highly motivated breadwinners and relaxed bohemians, and a greater range of winning and losing investors. A result is a greater variety of incomes. Since the United States is growing older and also more educated, income inequality will naturally rise.
Thomas Lemieux, professor of economics at the University of British Columbia, estimates that these demographic effects account for about three-quarters of the observed rise in income inequality for men and 69 to 95 percent of the observed rise in income inequality for women ("Increasing Residual Wage Inequality: Composition Effects, Noisy Data, or Rising Demand for Skill?" The American Economic Review, June 2006). In other words, rising income inequality is not just a result of unfairness or bad public policy.
Cowen further notes that there are a couple of measurements that are not going up, even if measured income inequality is: "inequality of consumption — the difference between what the poor consume and what the rich consume — does not show a significant upward trend" and
Studies of personal happiness, based on questionnaires and self-reporting, indicate that the inequality of happiness is not growing over time in the United States. Furthermore, the United States has an inequality of happiness roughly comparable to that of Sweden or Denmark, two nations with strongly egalitarian reputations.
Leisure time also is rising more among the less-educated than the highly-educated in the past 40 or so years as well. In other words: money isn't everything--and a world where most everyone is pretty much getting richer, in many ways not adequately measured by money income, can be a pretty nifty world, even if everyone doesn't get richer at the same rate.