Wednesday, 22 Oct 2014 07:00 AM
“The share of wealth held by the top 0.1 percent of families is now almost as high as in the late 1920s, when ‘The Great Gatsby’ defined an era that rested on the inherited fortunes of the robber barons of the Gilded Age,” the economists write in a blog post for the Washington Center for Equitable Growth.
Wealth concentration has followed a U-shaped trend in the last 100 years, Saez and Zucman write. Wealth disparity was high in the beginning of the 20th century, fell from 1929 to 1978 and has increased since then.
The bottom 90 percent of the population held 15 percent of total wealth in the late 1920s, they write in their paper, “Wealth Inequality in the United States since 1913: Evidence from Capitalized Income Tax Data.” The share rose steadily rose to 35 percent in the mid-1980s, the economists say, pointing to rising pensions and housing wealth. The share then fell to 23 percent in 2012 due to increasing mortgages and other debt.
Meanwhile, the wealthiest 10 percent is taking a larger share of the economic pie, as incomes at the top surged and savings rates between top earners and the rest of the population diverged.
The return of wealth inequality is almost entirely due to the top 0.1 percent, a small group of about 160,000 with net assets over $20 million in 2012, getting richer. The overall share of total household wealth owned by that small group increased from 7 percent in 1979 to 22 percent in 2012, creating a level of disparity not seen since 1929.
To reduce wealth inequality, or at least to slow growing income inequality, the economists recommend progressive income taxes, estate taxes, providing quality, affordable education, controlling healthcare costs, minimum wage policies and “policies shifting bargaining power away from shareholders and management toward workers.”
To measure wealth disparity, the economists gathered capital income, such as dividends, interest, rents and business profits, reported on tax returns, then capitalized the income to match wealth recorded in the Federal Reserve’s Flow of Funds, which measures Americans’ total wealth.
More and more experts are expressing concern about income inequality — and some are demanding action. Federal Reserve Chair Janet Yellen admitted growing wealth inequality is a problem.
At a conference last week she stated, “The extent of and continuing increase in [income] inequality in the United States greatly concern me.”
“Janet Yellen is right,” notes Sen. Bernie Sanders, I-Vt., in a press release.
“Income inequality is the worst it has been since the 1920s. Now that we have a Fed Chair who recognizes the problem, the Fed must act as boldly to rescue the disappearing middle class as it did when it bailed out too-big-to-fail banks. The Fed must demand that big banks significantly increase affordable loans to small businesses to create jobs, instead of parking its money at the Fed and making risky bets on Wall Street.”