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New Research Shows That Income Inequality in United States is Rising

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According to new research, things are going extremely well for people at the top of the income distribution in the United States, but economic growth for those in the bottom half has stalled since the 1970s.

Saez, Zucman and Piketty, co-directors of the World Wealth and Income Database write that although the bottom 50 percent is by definition 50 times larger than the top group in terms of numbers, the top 1 percent’s income share is almost twice as large as the bottom 50 percent share.

That is however not the only bad news:

  • Only income for the elderly is rising in the bottom half of the distribution range, while income has decreased for those under the age of 65.
  • Since 1980, virtually no growth has taken place for working age adults in the bottom 50 percent of the distribution.
  • As one moves up the income ladder, the share of women falls sharply. Today, only 11 percent women are in the top 1 percent.
  • Today, the top 1 percent adults earn on average 81 times more than the bottom 50 percent adults do, while in 1980 they earned 27 times more.
  • The average income share of the top 1 percent of adults rose from about 12 percent between the early 1980s and 2014, and their pre-tax income rose from $420,000 to about $1.3 million.
  • The bottom 50 percent’s share of income share has dropped to 12 percent in 2014 from about 20 percent in 1980.
  • Since 1980, the average income before tax of adults in the bottom 50 percent income share has stagnated in the U.S.

 

The economists documented the inequities through a combination of national account data, tax, and surveys that captures 100 percent of national income.

To address the inequalities they suggest that:

  • Education and access to skills should be improved
  • Labor market institutions should be reformed to boost workers’ bargaining power
  • A higher minimum wage should be instituted

The full paper that was published by the National Bureau of Economic Growth can be found here.