Since the early 2000s, Thomas Piketty of the Paris School of Economics and Emmanuel Saez of University of California at Berkeley have published influential research on income inequality. Still, their picture of wealth and income inequality in the United States remained incomplete, mostly because of gaps in their data. Using a new data set, they find greater inequality in the US than they had previously recorded.
Professors Thomas Picketty of the Paris School of Economics and Emmanuel Saez of the University of California at Berkeley were able to construct a data set, based on available records, that showed income levels from 1913 to the present day.
The data set reveals since 1980 a “sharp divergence in the growth experienced by the bottom 50 percent versus the rest of the economy,” the researchers write. The average pretax income of the bottom 50 percent of US adults has stagnated since 1980, while the share of income of US adults in the bottom half of the distribution collapsed from 20 percent in 1980 to 12 percent in 2014. In a mirror-image move, the top 1 percent commanded 12 percent of income in 1980 but 20 percent in 2014. The top 1 percent of US adults now earns on average 81 times more than the bottom 50 percent of adults; in 1981, they earned 27 times what the lower half earned.
And although the growth in income inequality from the 1970s to the 1990s was caused mostly by wage growth among top earners, that gap “has been a capital-driven phenomenon since the late 1990s,” the researchers contend, because of an income boom due to equity and bond holdings. “The working rich are either turning into or being replaced by rentiers,” they write, echoing a theme from Piketty’s 2014 bestselling book, Capital in the Twenty-First Century.