U.S. AND EUROPEAN INEQUALITY. I think Greg Mankiw partially obscures the import of this graph comparing what high income and low income households make across developed countries. "The bottom line:" he writes. "The poor in the United States have about the same real income as the poor in western Europe. The rich in the United States, however, are much richer."
Well, on pure income, that's true. But the poor in these countries have expansive, state-supplied health care, far better public transport options, lusher pensions, paid time off, longer vacations, and all the other luxuries and securities associated with the European welfare state, and not available to Americans till they climb significantly farther up the income ladder. In essence, that's the European trade off: A very high floor, with a significantly lower ceiling. America has quite the opposite: An astonishingly low floor, with a very high ceiling. We have an economy that's terrifically effective at maximizing gains for the rich and very ineffective at sharing them among the poor. Europe isn't terribly good at getting people rich, but they're much better at keeping people not-poor.
It's also interesting that the U.S's tenth percentile is so close in income share to everyone else's. Not so for our 90th. I wonder when the tipping point occurs and the U.S.'s X percentile begins amassing a far greater percentage of the income than the X percentile of our competitors. And I wonder what the breakdown looks like below the 10th percentile.