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Inequality, Income, and Wealth

Nobel Laureate Joseph Stigliz summarizes disparities based on income, wealth, and color. Income and wealth outcomes are poor for people of color. Residential and educational segregation and employment discrimination lead to less opportunity – including climate adaptation and park access. These structural disparities create large wealth gaps. These inequalities transmit down through generations from parents to children. “This is especially troubling given that people of color make up a majority of the nation’s future work force,” population, and voters. Joseph Siglitz, Rewriting the Rules of the American Economy: An Agenda for Growth and Shared Prosperity, 81 (2016).

Inequality in income top 10% CA and US Saez & Piketty

saez_CAdemocrats top 10

Figure 1

Income inequality has exploded in the U.S. and in California over the past four decades, as shown in the U-shaped graphs. There are extreme income inequalities for the top 10% and top 1% in the U.S. In California, income inequality is even worse. California has the seventh largest economy in the world — and the largest percent of people living in poverty in the U.S. (25%). A large portion of this increase in inequality is due to an upsurge in the labor incomes earned by senior company executives and successful entrepreneurs.

The share of the top decile in the U.S. national income was 45-50% in the 1910s-1920s, and dropped to less than 35% in the 1950s, as shown in Figure 1. The share of the top decile then rose dramatically from less than 35% in the 1970s to 45-50% in the 2000s-2010s. The pattern of inequality is even worse in California since the 1970s, with the top decile receiving over 50% of total income in 2012. This leaves about 50% of the income for 90% of the people. The middle 40% receive 30% of the income. The bottom 50% of the people receive only 20% of the income in the U.S.

In 2012, the top decile included all families with total income above $114,000. The bottom half includes families whose income falls below about $50,000.

From 1977 to 2007, the richest 10% appropriated three-quarters of the growth on national income. The richest 1% alone absorbed nearly 60 percent of the national income. For the bottom 90%, the rate of income growth was less than .5 percent per year.

Click here for inequality in total income for the top 1% in the U.S. and California.

Click here for inequality in income and wealth for the top 1%, top 10%, middle 40%, and bottom 50% in the U.S.

Click here for inequality based on race, ethnicity, wealth, and poverty.

 

Inequality in income top 1% CA and US Saez & Piketty

saez_CAdemocrats15 top 1

Figure 2

Income inequality has exploded in the U.S. and in California over the past four decades, as shown in the U-shaped graphs. There are extreme income inequalities for the top 10% and top 1% in the U.S. In California, income inequality is even worse. California has the seventh largest economy in the world — and the largest percent of people living in poverty in the U.S. (25%). A large portion of this increase in inequality is due to an upsurge in the labor incomes earned by senior company executives and successful entrepreneurs.

As shown in Figure 2, the share of the top 1% in the U.S. national income was about 13-20% in the 1910s-1920s, and dropped to about 10-11% in the 1950s. It then rose dramatically from less than 10% in the 1970s to about 17-23% in the 2000s-2010s. The pattern of inequality is generally similar in California, with the top 1% receiving over 25% of the income in 2012.

In 2012, the top percentile included families with income above $394,000 in 2012. The bottom half includes families whose income falls below about $50,000.

Click here for inequality in total income for the top 10% in the U.S. and California.

Click here for inequality in income and wealth for the top 1%, top 10%, middle 40%, and bottom 50% in the U.S.

Click here for inequality based on race, ethnicity, wealth, and poverty.

Inequality in income and wealth top 1%, top 10%, middle 40%, bottom 50% Piketty

U.S. Inequality 2010 B Distribution of Total Income C Distribution of Labor Income D Distribution of Capital
Top 10% 50% 35% 70%
    Top 1% 20% 12% 35%
    Next 9% 30% 23% 35%
Middle 40% 30% 40% 25%
Bottom 50% 20% 25%   5%

 

The table shows inequalities in total income, labor income, and wealth for the U.S. in 2010. Column B shows the distribution of total income from labor and capital between the top 1%, the top 10%, the middle 40%, and the bottom 40% in the U.S. The top 10 percent made more than $108,000 per year in 2010, the top 1 percent more than $352,000, and the top .1 percent more than $1.5 million.

Column C shows the distribution of labor income. Wage income at the top has surged. The spectacular increase in income inequality largely reflects an unprecedented explosion of very elevated income from labor, separating top managers of large firms from the rest of the people. This “record level of inequality of income from labor [is] probably higher than in any other society at any time in the past, anywhere in the world, including societies in which skill disparities were extremely large,” according to Thomas Piketty.

The rise in U.S. economic inequality is not purely a matter of rising labor compensation at the top. Wealth inequality is rising as well. Column D shows inequalities in wealth.

Click here for inequalities in total income for the top 10% and the top 1% in the U.S. and California.

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Inequality based on wealth, race and ethnicity Piketty & Pew

According to Prof. Thomas Piketty, “The United States to this day is a country of extremely brutal inequality, especially in relation to race, whose effects are still quite visible. [B]lacks were deprived of civil rights until the 1960s and subjected to a regime of legal segregation . . . .  This no doubt accounts for many aspects of the development – or rather nondevelopment – of the U.S. welfare state.”

pew wealth race 2015

The Great Recession, fueled by the crises in the housing and financial markets, was universally hard on the net worth of families in the U.S. Although asset prices have started to recover, not all households have benefited alike, and wealth inequality has widened along racial and ethnic lines.

The wealth of non-Hispanic white households was 13 times the median wealth of black households in 2013, compared with eight times the wealth in 2010, according to the Pew Research Center.

The wealth of non-Hispanic white households is now more than 10 times the wealth of Hispanic households, compared with nine times the wealth in 2010.

From 2007 to 2010, the median net worth of families in the U.S. decreased by 39.4%, from $135,700 to $82,300. Rapidly plunging house prices and a stock market crash were the immediate contributors to this shellacking. An analysis of Federal Reserve data does reveal a stark divide in the experiences of white, black and Hispanic households during the economic recovery. (Asians and other racial groups are not separately identified in the public-use versions of the Fed’s survey.)

From 2010 to 2013, the median wealth of non-Hispanic white households increased from $138,600 to $141,900, or by 2.4%. Meanwhile, the median wealth of  black households fell 33.7%, from $16,600 in 2010 to $11,000 in 2013. Among Hispanics, median wealth decreased by 14.3%, from $16,000 to $13,700. For all families — white, black and Hispanic — median wealth is still less than its pre-recession level.

The racial and ethnic wealth gaps in 2013 are at or about their highest levels observed in the 30 years for which there is data (except for 1989 when the ratios may be anomalies driven by fluctuations in the wealth of the poorest).

Inequality based on poverty, race and ethnicity

poverty 2007-2011 census

Source www.census.gov/prod/2013pubs/acsbr11-17.pdf

Income_and_Poverty US_2013

Source www.census.gov/content/dam/Census/library/publications/2014/demo/p60-249.pdf

Click here for inequality based on wealth, race and ethnicity.

Click here for inequality in total income for the top 10% and the top 1% in the U.S. and California.

Click here for inequality in income and wealth for the top 1%, top 10%, middle 40%, and bottom 50% in the U.S.
Sources

Thank you to Prof. Prof. Emmanuel Saez of UC Berkeley for the graphs

Emmanuel Saez, personal communication

Emmanuel Saez, Striking it Richer: The Evolution of Top Incomes in the United States (2013)

Thomas Piketty, Capital in the 21st Century (2014)

Emmanuel Saez & Gabriel Zucman, Exploding wealth inequality in the United States, Washington Center for Equitable Growth (Oct. 20, 2014)

What Percent Are You? N.Y. Times, Jan. 14, 2012