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The Cost of Inequality: Why Economic Equality is Essential for Recovery, by Stewart, Lansley (London, Gibson Square, ), pp.
Table of contents

After-tax incomes fell sharply at the top of the distribution in and but have since partially recovered. The up-and-down pattern in may reflect, in part, decisions by wealthy taxpayers to sell assets in that had increased in value since they were first purchased in order to pay taxes on those capital gains before income tax rates increased in The Piketty-Saez data discussed below, which go through , show a generally upward trend since that is consistent with this explanation.

Although the average income after transfers and taxes of the top 1 percent of households remains well below its peak, the percentage increase in their average income after transfers and taxes from to was more than five times larger than that of the middle 60 percent and more than three times larger than that of the bottom fifth. See Table 1. Trends in income before transfers and taxes look very similar. Because average tax rates have fallen for all income groups since , income before transfers and taxes grew somewhat more slowly than income after transfers and taxes from to See the box for more on the effect of transfers and taxes on income.

The Piketty-Saez data put the increasing concentration of income at the top of the distribution into a longer-term historical context. The vast majority of the increase occurred among the top 0. The increase in income concentration since the s reversed the prior, long-term downward trend. After peaking in , the share of income held by households at the very top of the income ladder declined through the s and s. Consistent with the shared prosperity found in the Census data on average family income, the share of income received by those at the very top changed little over the s, s, and early s.

The sharp rise in income concentration at the top of the distribution since the late s was interrupted briefly by the dot-com collapse in the early s and again in with the onset of the financial crisis and deep recession. Top incomes generally have been on the rise since SCF data go back to ; the latest published data are for The SCF is based on a sample of about 6, families.

The data sources discussed in the preceding sections on income distribution are superior to the SCF for measuring income distribution, but none of those sources has comparable data for looking at the distribution of wealth. As the chart illustrates, wealth is much more concentrated than income.

It should be noted that while there is considerable overlap, the top 1 percent of the income distribution does not contain the identical group of people as the top 1 percent of the wealth distribution. The SCF data show that the top 1 percent of the income distribution received roughly a quarter of all income in , while the top 1 percent of the wealth distribution held nearly two-fifths of all wealth.

Similarly, the top 10 percent of the income distribution received a little more than half of all income, while the top 10 percent of the wealth distribution held more than three-quarters of all wealth. SCF data show rising concentration of wealth for the top 1 percent, little change for the rest of the top 10 percent, and a declining share for the bottom 90 percent. In particular, the share of wealth held by the top 1 percent rose from just under 30 percent in to While the SCF is invaluable, it has its limitations, especially for detecting trends in wealth concentration at the very top.

Recently, Emmanuel Saez and Gabriel Zucman have used tax-return information on income derived from wealth to infer the underlying distribution of wealth over time. As with income, these data show a long historical decline in the concentration of wealth from the late s into the late s. Concentration at the top has increased markedly since then, driven by a rising share of wealth at the very top. The official U. Each family or unrelated individual in the population is assigned a money income threshold based on the size of his or her family and age of its members.

The poverty thresholds are adjusted each year to reflect changes in the consumer price index. The poverty rate is the percentage of people living in poverty. The official poverty statistics show a sharp decline in the poverty rate between and but little real change since then, apart from fluctuations due to the business cycle.

For a number of reasons, however, the official measure is an unreliable guide to trends in poverty since and significantly understates progress in reducing poverty since then. The official poverty measure is based on Census money income, which includes cash assistance but does not count non-cash assistance like SNAP formerly known as food stamps and rental vouchers.

Over the years, researchers have raised a number of serious conceptual and measurement concerns about how the official poverty rate is calculated. NAS-based measures use a more complete definition of income that includes the value of non-cash benefits and tax credits while subtracting taxes and certain expenses. The NAS also recommended using a modernized poverty line that varies with local housing costs.

This measure reflects recommendations from a federal interagency technical working group that drew on the NAS report and subsequent research. The Census SPM is available from to Unlike in the official poverty measure and most previous implementations of the NAS measure , unmarried partners are counted in the same SPM family.

See Figure 6. Without government assistance, poverty would have been about the same in as in under this measure, which indicates the strong and growing role of antipoverty policies. Also, measured with the SPM, the child poverty rate remained at a record low of This improvement is largely due to increasingly effective government assistance policies. Economic security programs cut poverty nearly in half in These programs i.


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Poverty also rose much less in the Great Recession when measured by the SPM rather than the official rate. Between the year before the recession and the year after the recession , the anchored SPM rose from The smaller increase under the SPM largely reflects the wider range of economic security programs included in the SPM and their success in keeping more Americans from falling into poverty during the recession.

Such underreporting is common in household surveys and can affect estimates of poverty and, in particular, deep poverty because people who underreport their benefits naturally make up a larger share of those with the lowest reported incomes. While respondents may also underreport earned income, the net rate of underreporting in the CPS is thought to be much lower for earnings than for benefits. By the official measure, the share of children below half the poverty line fell from to , from 8. When counting non-cash benefits and taxes but not correcting for underreporting, the figures are essentially flat, at 4.

The Cost of Inequality: Three Decades of the Super-rich and the Economy

Only the corrected figures show the increase. See Figure 8. The increase in deep poverty for children was largely due to means-tested benefits becoming less effective at shielding children from deep poverty. Over the period, TANF cash assistance programs served a shrinking share of very poor families with children. For its more limited set of categories, the ACS provides better data at the state and local level than the CPS, but Census advises that the CPS data provide the best annual estimates of income, poverty, and health insurance coverage for the nation as a whole.

Census money income does not include non-cash benefits such as those from the Supplemental Nutrition Assistance Program food stamps , Medicare, Medicaid, or employer-provided health insurance. Enlarge cover.


  • Economic Inequality?
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  • Error rating book. Refresh and try again. Open Preview See a Problem? Details if other :. Thanks for telling us about the problem. Return to Book Page. The best-seller 'The Spirit Level' argued that unfairness in a society results in pernicious social consequences, such as higher crime and poorer education. In this book, however, economist Stewart Lansley argues that the economic cost to inequality is far higher and more immediate for all of us.

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    Get A Copy. Hardcover , pages. More Details Original Title. Other Editions 3. Friend Reviews. To see what your friends thought of this book, please sign up. To ask other readers questions about The Cost of Inequality , please sign up. Be the first to ask a question about The Cost of Inequality.


    1. Income and Wealth Inequality.
    2. The Cost of Inequality: Three Decades of the Super-rich and the Economy;
    3. Democracy Denied, 1905-1915: Intellectuals and the Fate of Democracy.

    Lists with This Book. Community Reviews. Showing Rating details. More filters. Sort order. Jan 07, Athene Wherrett rated it it was amazing. A really good an accessible book on the pitfalls of a de-regulated financial system, going in to detail about the disastrous effects it's had on the economy including specific examples, for example the account of the private takeover of Debenhams will really make your blood boil. It's astonishing that some people still believe that de-regulation is the only way forward, and that the markets are naturally self-regulating.

    Justice, Inequality, and the Poor

    In , the top 1 percent of households received 16 percent of income before transfers and taxes and 13 percent of income after federal transfers and taxes; the comparable figures for the bottom 80 percent of households were 47 and 54 percent, respectively. After-tax incomes fell sharply at the top of the distribution in and but have since partially recovered. The up-and-down pattern in may reflect, in part, decisions by wealthy taxpayers to sell assets in that had increased in value since they were first purchased in order to pay taxes on those capital gains before income tax rates increased in The Piketty-Saez data discussed below, which go through , show a generally upward trend since that is consistent with this explanation.

    Although the average income after transfers and taxes of the top 1 percent of households remains well below its peak, the percentage increase in their average income after transfers and taxes from to was more than five times larger than that of the middle 60 percent and more than three times larger than that of the bottom fifth. See Table 1. Trends in income before transfers and taxes look very similar.

    Redistributing prejudice

    Because average tax rates have fallen for all income groups since , income before transfers and taxes grew somewhat more slowly than income after transfers and taxes from to See the box for more on the effect of transfers and taxes on income. The Piketty-Saez data put the increasing concentration of income at the top of the distribution into a longer-term historical context.

    The vast majority of the increase occurred among the top 0. The increase in income concentration since the s reversed the prior, long-term downward trend. After peaking in , the share of income held by households at the very top of the income ladder declined through the s and s. Consistent with the shared prosperity found in the Census data on average family income, the share of income received by those at the very top changed little over the s, s, and early s.

    The sharp rise in income concentration at the top of the distribution since the late s was interrupted briefly by the dot-com collapse in the early s and again in with the onset of the financial crisis and deep recession. Top incomes generally have been on the rise since SCF data go back to ; the latest published data are for The SCF is based on a sample of about 6, families. The data sources discussed in the preceding sections on income distribution are superior to the SCF for measuring income distribution, but none of those sources has comparable data for looking at the distribution of wealth.

    As the chart illustrates, wealth is much more concentrated than income. It should be noted that while there is considerable overlap, the top 1 percent of the income distribution does not contain the identical group of people as the top 1 percent of the wealth distribution.

    UNU-WIDER : Research Brief : The Rise and Fall in Income Inequality in Ecuador

    The SCF data show that the top 1 percent of the income distribution received roughly a quarter of all income in , while the top 1 percent of the wealth distribution held nearly two-fifths of all wealth. Similarly, the top 10 percent of the income distribution received a little more than half of all income, while the top 10 percent of the wealth distribution held more than three-quarters of all wealth. SCF data show rising concentration of wealth for the top 1 percent, little change for the rest of the top 10 percent, and a declining share for the bottom 90 percent.