Friday, November 18, 2016

Unsustainable Income Inequality

This is an excerpt from a longer story that I did last year about Thomas Piketty's book Capital in the Twenty-First Century. To see the full story, click here.

The Other End of the Pay Scale: Supermanagers and Their Pay
Meanwhile, at the other end of the pay scale, we have another graph that destroys an entire imperial wardrobe of false justification, prevarication, and artful misdirection. Figure 9.8 compares income for the top 10 percent in the United States versus Europe (in this case Great Britain, Sweden, France, and Germany). It's on page 324 of the book; it's also in the Technical Appendix: click here.

The chart goes back to 1900, but for our purposes the story begins around 1980, when salaries for what Piketty calls supermanagers started to skyrocket in the United States (pp. 291, 294). Top salaries also increased in Europe, but to a much lesser degree.

Piketty says "what primarily characterizes the United States at the moment is a record level of inequality of income from labor (probably higher than in any other society at any time in the past, anywhere in the world, including societies in which skill disparities were extremely large." (P. 265.)

He adds, "The increase was largely the result of an unprecedented 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." (P. 298.)

And he observes, "It is hard to imagine an economy and society that can continue functioning indefinitely with such extreme divergence between social groups." (P. 297.)

No comments:

Post a Comment