COHABITATION IN THE UPPER CENTILE

We should dispel the notion that capital income HAS VANISHED from the summit of the US social hierarchy

A very substantial and growing inequality in capital income since 1980 accounts for about 1/3 of the increase in income inequality in the US

In the US case, as in France but to an even greater degree, the difference today is that one has to clime much further up in the income hierarchy before income from capital takes the upperhand.

The increase in very high incomes and very high salaries primarily reflects the advent of supermanagers, that is, top executives of large firms who have managed to obtain extremely high, historically unprecedented compensation packages for labor

The new US equality has more to do with the advent of supermanagers than with that of superstars

THE RISE OF SUPERSALARIES

Unprecendented increase in wage inequality and in particular the emergence of extremely high remunerations at the summit of the wage hierarchy, particularly among top managers of large firms

The wage inequality in the US changed in major ways over the past century: 1.) unprecedented increase in wage inequality does not appear to have been compensated by increase wage mobility over the course of a person’s career

DID THE INCREASE OF INEQUALITY CAUSE THE FINANCIAL CRISIS

YES. One consequence of increasing inequality was virtual stagnation of the purchasing power of the lower and middle classes in the US, which inevitably made it more likely that modest households would take on debt, especially since unscrupulous bans and financial intermediaries, freed from regulation and eager to earn good yields on the enormous savings injected into the system by the well-to-do, offered credit on increasingly generous terms

THE EXPLOSION OF INEQUALITY AFTER 1980

Inequality reached its LOWES EBB in the US between 1950 and 1980 The United States was even more egalitarian than France The series in Figure 8.5 take account only of income declared in tax returns and in particular do

not correct for any possible understatement of capital income for legal or extralegal reasons Stock market euphoria and capital gains can account for only part of the structural increase in

the top decile’s share over the past 30 or 40 years From the late 1970s to 2010, the increase in the upper decile’s share (exclusive of capital gains)

appears to have been relatively steady and constant THIS IS A CRUCIAL POINT: the facts show quite clearly that the financial crisis as such cannot be

counted on to put an end to the structural increase of inequality in the US That means that since 1980, these social groups (top 10%?) have experienced income growth

substantially higher than the average growth of the US economy, which is not negligible

A MORE COMPLEX CASE: THE TRANSFORMATION OF INEQUALITY IN THE US

The rise of supermanagers The most striking fact is that the US has become noticeably more inegalitarian than France (and

Europe as a whole) from the turn of the 20th century until now, even though the US WAS MORE EGALITARIAN at the beginning of this period

US inequality in 2010 is quantitatively as extreme as in old Europe in the first decade of the 20th century, but the structure of that inequality is rather clearly different

First, European INCOME inequality was significantly greater than the US inequality at the turn of the 20th century1. Capital/income ratio was higher in Europe, and so was capital’s share of national income2. Inequality of ownership of capital was somewhat less extreme in the New World

Nevertheless, capital was distributed somewhat less unequally in the US than in France or Britain

Consequently, US rentiers were fewer in number and not as rich as their European counterparts Income equality in the US increased quite sharply during the 1920s US INEQUALITY WAS NOT THE SAME AS EUROPEAN INEQUALITY Great Depression, which hit the US particularly hard, and again during the second world war,

when the nation was fully mobilized behind the war effort, income inequality was substantially compressed

TO SUM UP: inequality in the US started from a lower peak on the eve of the first World War but at its low point after World War II stood above inequality in Europe

THE INCREASE OF INEQUALITY IN FRANCE SINCE THE 1980s

“microphenomenon” The profit share in 1966-67 was historically high, a consequence of the restoration of capital’s

share that began at the end of World War II Capital’s share of national income actually continued to grow in the 1990s and 2000s Stunning new phenomenon in France (1990s): the very top salaries, and especially the pay

packages awarded to the top executives of the largest companies and financial firms, reached astonishing heights – somewhat less astonishing in France, for the time being than in the US, but still, it would be wrong to neglect this new development