Inequality retards economic output

income including assets 1950 to 2014

Source: Bureau of Labor Statistics

There’s no question that wages and salaries in the private sector have steadily increased, as the above chart shows. Those working in government have seen more modest gains—in the aggregate. Income derived from assets advanced as well, at slightly higher rates since 1980.

Of course, these are total numbers. They do not reflect the widening gap between the Haves and Have-nots. Berkeley’s Emmanuel Saez has crunched the numbers.

income distribution including capital gains 1950 to 2014

Income levels for each fractile (2010 $)

As recounted in these pages, economic growth has faltered over the last few decades, coinciding with income inequality. This paper argues that lessening inequality would stimulate the economy.

New OECD research shows that when income inequality rises, economic growth falls. One reason is that poorer members of society are less able to invest in their education. Tackling inequality can make our societies fairer and our economies stronger.

Yet, each of the Republican candidates for president advocates lower taxes on the wealthy, which would only exacerbate inequality while increasing the federal deficit. They also champion reductions in government transfers and subsidies, including investments in public education, that benefit the bottom 90 percent, whose wages have stagnated in my lifetime.