Economy

Thomas Piketty Ran The Numbers On Income Inequality. Here’s What He Found.

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Some of the top experts on income inequality released a study of new, more accurate data this week, revealing that Americans in the top 1 percent have done far better than everyone else for the last half century — and why they’ve gotten so far ahead.

At the American Economic Association conference this week, economists Emmanuel Saez, Gabriel Zucman, and Thomas Piketty released their preliminary research that uses a new analysis of tax, survey, and national accounts data. That’s more accurate, they say, than just looking at tax data, which misses huge chunks of the actual income people bring home.

The new analysis disputes previous findings that the bottom 90 percent of Americans have seen a slight decline in income since the late 1970s. Instead, the economists say, their income actually increased slightly, by 0.7 percent annually. But the data still corroborates the story of increasing inequality between most Americans and the richest. The incomes of the wealthiest 10 percent grew faster than everyone since 1980, they found. Worse, incomes for the top 1 percent grew about four times as fast as the bottom 90 percent in the same time period.

The data revealed other disturbing trends as well. Until 1980, income for the bottom 90 percent grew at the same pace as the rest of the economy. But after that point, incomes slowed down while the economy kept growing.

Along the same lines, income among the top 10 percent and the bottom 90 used to grow at about the same rate. But since 1980, it’s grown faster at the top and slower at the bottom.

Part of what’s happening is that the source of the top 1 percent’s income has changed. Up until the late 1990s, most of the growth was driven by the rich getting higher wages. But since then, it’s been driven by capital income — money made from returns on investment. That jibes with a past study that found that lowered tax rates on capital gains income are “by far the largest contributor” to growing income inequality

For everyone else, on the other hand, wage growth is more important to income. But wages for most Americans have been stagnant for the last 40 years, even as economic productivity continued to increase.

Things have gotten bad enough that now the top 10 percent of Americans are taking home about half of all of the country’s income, more than what they captured during the roaring 1920s. And the recession, rather than leveling the playing field, has only made things worse. Between 2009 and 2014, the top 1 percent took home 58 percent of all income growth.