Read

User menu

Search form

One Chart that Shows How Much Worse Income Inequality Is In America than Europe

One Chart that Shows How Much Worse Income Inequality Is In America than Europe
Mon, 8/13/2018 - by Emily Stewart
This article originally appeared on Vox

Income inequality is a growing problem in the United States. The richest Americans have reaped a disproportional amount of economic growth while worker wages have failed to keep pace. And the $1.5-trillion Republican-passed tax cuts from December stand to make the situation worse.

One chart from the 2018 World Inequality Report highlights the unique nature of income inequality in the US compared to other developed regions — namely, Western Europe. And the contrast is stark.

From 1980 to 2016, the poorest half of the US population has seen its share of income steadily decline, and the top 1 percent have grabbed more. In Europe, the same trend can’t be observed.

In 1980, the top 1 percent’s share of income was about 10 percent in both Western Europe and the US, but since then, the two have severely diverged. In 2016, the top 1 percent in Western Europe had about a 12-percent share of income, compared to 20 percent in the United States. And in the US, the bottom 50 percent’s income share fell from more than 20 percent in 1980 to 13 percent in 2016.

The economists behind the report — Facundo Alvaredo, Lucas Chancel, Thomas Piketty, Emmanuel Saez, and Gabriel Zucman — lay out an explanation of what’s happening:

"The income-inequality trajectory observed in the United States is largely due to massive educational inequalities, combined with a tax system that grew less progressive despite a surge in top labor compensation since the 1980s, and in top capital incomes in the 2000s. Continental Europe meanwhile saw a lesser decline in its tax progressivity, while wage inequality was also moderated by educational and wage-setting policies that were relatively more favorable to low and middle-income groups. In both regions, income inequality between men and women has declined but remains particularly strong at the top of the distribution."

The 2018 World Inequality Report was released in December 2017.

To be sure, wealth inequality is a global problem, and ranked among all nations, the United States does better than dozens of countries. But the visualization of how much the switch has flipped on the richest and poorest Americans over the past two decades is stunning.

Vox’s Dylan Matthews in 2017 highlighted research from Pikkety, Saez, and Zucman — three of the researchers behind the World Inequality Report — also examining how much income gains have gone to the super-rich in recent decades instead of the middle and lower class. From 1946 to 1980, the middle class and poor were actually seeing their pay growth outpace that of the rich. But since then, the trend has moved sharply in the opposite direction.

The Tax Bill is Likely to Exacerbate Wealth Inequality in the United States

The economists behind the World Inequality Report explain the divergence between the US and Europe, but there are a number of factors that could be driving income inequality in the US more broadly. Still, it’s unlikely that the GOP tax bill will help. Passed in December, the legislation reduced the corporate tax rate to 21 percent from 35 percent and disproportionately benefits businesses and the wealthy.

According to estimates from the Center on Budget and Policy Priorities, the top fifth of earners get 70 percent of the bill’s benefits, and the top 1 percent get 34 percent. The new tax treatment for “pass-through” entities — companies organized as sole proprietorships, partnerships, LLCs, or S corporations — will mean an estimated $17 billion in tax savings for millionaires in 2018. American corporations are showering their shareholders with stock buybacks, thanks in part to their tax savings, and have returned nearly $700 billion to investors this year.

Taxes aren’t the only matter in play in income inequality, but they’re part of it. And the tax cuts aren’t helping.

Originally published by Vox

 

Sign Up

Article Tabs

Illustration by Grace Alton

For millions of renters in the U.K., a robust set of policies around rental law would be life-changing. But the bill making its way through Parliament has to be done right.

Public Bank LA, public banking, public finance, city owned banks, Public Banking Institute, cooperative economics, mass movements

What does the disappointing loss on L.A.’s public banking initiative tell us about the future of cooperative economics?

ICE detention centers, ICE abuse, immigrant arrests, Corecivic, Geo Group, General Dynamics, immigrant detentions

ICE does business with a lot of companies that are making big, big money imprisoning children. Now, Geo Group, Corecivic and General Dynamics are coming under increasing scrutiny.

The Pentagon broadens its horizons to domestic surveillance and “insurrection” - the all seeing eye is focused on the home front. Next, if we wanna survive humanity's demise that our choices designed, we have to start making different choices – at the dinner table. Finally, Dr. Sheila Vakharia joins us to talk harm reduction, addiction and drug policy.

Dodd-Frank act, financial collapse, 2008 crash, Alan Greenspan, unregulated markets, Too Big to Fail Too Big to Exist Act, Bernie Sanders, financial regulations

Donald Trump has warned that folks will “lose a lot of money” if the House turns blue. History—namely the 2008 financial crisis caused deregulated banks—suggests red is even costlier.

Illustration by Grace Alton

For millions of renters in the U.K., a robust set of policies around rental law would be life-changing. But the bill making its way through Parliament has to be done right.

Trump, Armistice Day, Trump nationalism, white nationalism, America First

Amid Armistice Day events in France, the president stands at the outskirts of the world stage.

Al Gore, Florida recount, Florida elections, George W. Bush, stolen 2000 presidency, 2018 midterms

At midnight on election day last Tuesday, vote tallies showed Republican candidates ahead in key races in Florida, Georgia and Arizona.

Public Bank LA, public banking, public finance, city owned banks, Public Banking Institute, cooperative economics, mass movements

What does the disappointing loss on L.A.’s public banking initiative tell us about the future of cooperative economics?

women of color, #Houston19, black women judges, judicial reform

Looking for some great news after Tuesday's midterms? Meet the #Houston19.

ICE detention centers, ICE abuse, immigrant arrests, Corecivic, Geo Group, General Dynamics, immigrant detentions

ICE does business with a lot of companies that are making big, big money imprisoning children. Now, Geo Group, Corecivic and General Dynamics are coming under increasing scrutiny.

Posted 4 days 9 hours ago
Public Bank LA, public banking, public finance, city owned banks, Public Banking Institute, cooperative economics, mass movements

What does the disappointing loss on L.A.’s public banking initiative tell us about the future of cooperative economics?

Posted 3 days 7 hours ago

The Pentagon broadens its horizons to domestic surveillance and “insurrection” - the all seeing eye is focused on the home front. Next, if we wanna survive humanity's demise that our choices designed, we have to start making different choices – at the dinner table. Finally, Dr. Sheila Vakharia joins us to talk harm reduction, addiction and drug policy.

Posted 5 days 3 hours ago

It’s a testament to how U.S. election rules tip the scales for white, rural voters who support the GOP.

Posted 5 days 3 hours ago

In total, 117 women were elected during the 2018 midterm elections – 96 elected to the House, 12 to the Senate and 9 as governor – shattering records and increasing the number of women in power.

Posted 5 days 3 hours ago
Youth Coalition, March For Our Lives, walkout to vote, school walkouts, young voters, 2018 midterms, Road to Change, gun violence, climate change, healthcare for all

The Future Coalition, including organizers with March For Our Lives, are leading students in hundreds of planned walkouts at schools nationwide for Tuesday's midterm election.

gerrymandering, partisan redistricting, National Conference of State Legislatures

Colorado and Michigan voters – and possibly in Utah as well – called for the creation of independent commissions to decide congressional and legislative district boundaries.

women of color, #Houston19, black women judges, judicial reform

Looking for some great news after Tuesday's midterms? Meet the #Houston19.

Roman empire, American decline, rising inequality, income inequality, corruption, Rome decadence,

Warnings from the fall of Rome.

Public Bank LA, public banking, public finance, city owned banks, Public Banking Institute, cooperative economics, mass movements

What does the disappointing loss on L.A.’s public banking initiative tell us about the future of cooperative economics?