Yup.
If you are one of the above individuals, what matters?
For most people, what matters is relative status and positioning. If you perceive yourself as not doing as well as the people in your immediate social circle, you're likely to be less satisfied.
However, that's not relevant to the problem of income inequality. Americans are surprisingly tolerant of the ultra-wealthy, as shown by the fascination with crap like the Kardashians. Anyway, you could have a circle of 20 people, all earning the same exact income, and you'd
still have misperceptions where everyone thinks everyone else is doing better.
The biggest issues with IE in the US at this time are:
• Top earners are reaping all the benefits from improved productivity
• Top earners (especially rentiers) are using this to leverage further gains and capture control of the political process
• This monopolization results in squeezing everyone else, which makes their lives far less secure, as well as negatively impacts growth
Unfortunately, reviewing Rawls and Nozick and Bentham is... a bit beyond the character limit. Anyway...
It's high time folks stop griping about IE and start griping about and solving the problems that give rise to IE. The fact that someone makes more money than you isn't the problem. The fact that you don't make enough is the problem. Our society needs to find ways, given the way the capitalist market works, to give people who lack skills that don't command a "sustaining" wage the skills the market demands to the extent that it pays those people a "sustaining" wage.
Unfortunately, that's not going to do it. Certainly not in isolation.
Again, the economics are quite clear: Anyone who is not in the top echelons -- top executives, hedge funders, inheritors, rentiers -- is getting screwed. They're capturing not just the income gains, but also most of the tax cuts.
The middle class in the US is getting squeezed out of existence. Professions that require even an undergraduate education saddle students with crushing debts. Law, once a solid ticket to the upper middle class, is now overwhelmed with grads who are increasingly crowding each other out, while entry-level slots are increasingly automated out of existence. Programming gets outsourced. Teaching, once a decent profession, barely pays above poverty levels. Journalism is dead. Accountants, architects, academics, nurses, mid-level management, sales... all on the ropes.
I don't know the solution, but I know that in most respects, the US is repeatedly making the wrong moves.
We need to increase taxes on higher income earners, corporations and estates. We've done the opposite in almost every administration since Reagan.
A second is to develop an actual working safety net. Again, we're doing the opposite.
A third option is to strengthen unions. That's not happening.
Raising minimum wages and increasing access to health insurance helps. But not much, and obviously both trigger massive political wars.
Last but not least, one aspect of the increase in income inequality probably can't be fixed: Assortative mating. As women have increasingly entered the workforce, including in higher-paying professions, people have increasingly wanted to marry someone who is more their equal, including (if not primarily) in terms of income. The days of the sole male breadwinner (which is a recent aberration; women have worked for most of human history) are gone, and not coming back. This is compounded by the rise of the single mother. Both of these pressures result in greater household income inequality.
