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Archive for October 22nd, 2014

Janet Yellin is not the only one with a new analysis of the growing chasm between the ultra-rich and everyone else  If you can handle some dense economics (or like me willing to skip past the fancy equations), take a look at a new paper by Emmanuel Saez and Gabriel Zucman on “Wealth Inequality in the United States since 1913.”

It seems that reliable data on wealth is not easy to come by.  So Saez and Zucman had to do some fancy calculation to figure out who owns how much and how the proportions have changed over time.   They find

wealth inequality has considerably increased at the top over the last three decades.  By our estimates almost all of the increase is due to the rise of the share of wealth owned by the 0.1% richest families, from 7% in 1978 to 22% in 2012.

That’s a level of inequality comparable to the early 1900s, before the Progressive Era.

Occupy movement, if you’re still out there, take notice. 

“Wealth concentration has followed a U-shaped evolution over the last 100 years,” they write  “It was high in the beginning of the twentieth century, fell from 1929 to 1978, and has continuously increased since then.”

(You can see the U-shaped curve and other charts at:  http://gabriel-zucman.eu/files/SaezZucman2014Slides.pdf.)

The top 0.1% is just 160,000 families whose wealth rose at 5.3% per year from 1986 to 2012. In the same period the bottom 90% saw its wealth stagnate. 

The key factors driving the wealth gap, Saez and Zucman conclude, is a surge in labor income among those at the tippy top and a decline in savings for those in the middle class.  That leads the authors to a set of recommendations.

First and perhaps most obvious, they recommend progressive income taxes and estate taxes.  

“Yet tax policy is not the only channel,” they say.

Other policies can directly support middle class incomes—such as access to quality and affordable education, health benefits, cost controls, minimum wage policies, or more generally policies shifting bargaining power away from shareholders and management toward workers.  [emphasis added]

It’s good to see a solution that deals with the cause of the problem.  Janet Yellin take notice.

 

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