Success Breeds Inequality

The recovery from the Great Depression of the 1930s was characterized by a degree of social solidarity and a narrowing of the gap between rich and poor. The recovery from the Great Recession of 2007–2009 has been very different. In the United States, for example, the gap between the wage growth of the rich and that of the poor has widened significantly, while the difference in earnings between the most successful firms and the rest has grown dramatically.

Rich People Are Getting (a Lot) Richer

Since 1971 incomes for the bottom half of the wealth distribution have been stagnant, and they have grown by only a third for Americans in the 50th to 90th percentiles—but they have more than doubled for the top 10%.

The Wealthiest Firms Are Pulling Away

The gap between top-earning and median firms in the United States has grown drastically since 1990. The latest data shows that firms at or above the 90th percentile of earnings have returns that nearly double their capital investments, compared with returns of just 15% for median firms.

The Tax System Has Grown Less Progressive

Federal income-tax rates for most Americans increased steadily throughout the 1970s before falling sharply after the 1981 and 1986 Reagan tax cuts. Taxes paid by the highest-earning Americans on their final dollars of income have dropped sharply since 1966, while taxes paid by those near the middle of the income distribution have declined by far less—and in some cases have increased.

Stocks Have Fully Recovered—but Housing Prices Have Not

The weak recovery of housing prices after the 2008 crash has meant that Americans whose wealth is based in housing assets have become poorer. The bottom 50% of Americans lost 16% of their wealth, on average, from 2007 to 2016 (after adjusting for inflation). But the main stock-market indices were 30% above their 2007 levels by 2016—a rebound that largely benefited the wealthy.