Reviews | Wealth inequality highest since World War II

Gross domestic product is a useful measure of a nation’s economic success, but what you’d also like to know is who reaps the benefits when it rises – the rich, the poor, the middle class, or everyone else. During the pandemic, for example, we know that government benefits have helped the poor, while stimulative monetary policy has boosted stock prices and particularly benefited the rich. What was the net result?

Three University of California, Berkeley economists – postdoctoral researcher Thomas Blanchet and professors Emmanuel Saez and Gabriel Zucman – have created an online tool to quickly and thoroughly answer this question. The tool, which calculates the distribution of economic growth across income and wealth groups, is called Real-time inequality. It is valuable for two reasons: it provides new insight into what has happened to various sections of the American population during the pandemic; and it is effectively a prototype for a measure that may one day be officially calculated and published by the federal government.

Using the tool’s drop-down menus, you can choose the time period, unit (household or adult individual), strata, and definition of income or wealth you wish to graph. Here is a chart I made using data from Realtime Inequality. I focused on two extremes of the population by income: the bottom half and the top 0.01% (i.e. one person in 10,000). I have plotted disposable income adjusted for inflation, which removes taxes and adds cash transfers such as child and earned income tax credits, as well as “quasi-cash transfers” such as food stamps.

One thing that stands out from the chart is the huge swings the bottom half has seen. In March 2021, for example, when the government sent out the third round of pandemic relief checks, the lower half’s inflation-adjusted monthly disposable income rose 70% from its February level.

Although this spike in income did not last, the bottom half of the population by income recovered much faster from the brief pandemic recession of 2020 than from the recession of 2007 to 2009. Based on the income before taxes, the Berkeley team found that all income groups fully recovered from the pandemic recession within 11 months, while for the bottom half it took 11 years and 10 months to recover from the recession former.

As the chart shows, the top 1% of the top 1% saw their disposable income plummet in early 2020 because corporate profits, their main source of income, briefly slumped. But don’t feel bad for these people. If you look at a larger group of wealthy people – the top 0.1% – and measure wealth rather than income, their share of national wealth increased by 1.3 percentage points, to 19 .1%, from the end of 2019 to the end of 2021, the Berkeley economists calculate. “The concentration of wealth at the end of 2021,” they write, “was at its highest post-World War II level.”

The reason the government does not publish these figures is that they are difficult to calculate. In principle, each dollar of GDP represents income for someone. But there are measurement gaps. the Current population survey managed by the Census Bureau and the Bureau of Labor Statistics captures less than half of the national income, leaving out things like employee benefits and business profits.

The Berkeley researchers solved this challenge by combining the Current Population Survey with tax data and other sources, including the Quarterly census of employment and wages. Their system distributes the entire estimated GDP among different subsets of the population, taking into account overall growth, changes in jobs and the performance of financial markets. Figures will be updated monthly.

Part of the process can be automated, but not all. For example, Berkeley economists originally assumed that all of the $800 billion Paycheck Protection Program, one of the government’s pandemic relief efforts, went to workers. But economists have revised that figure based on new research from a team led by David Autor, an economist at the Massachusetts Institute of Technology, showing that a majority of the funds ended up benefiting business owners and their shareholders and creditors.

Both Saez and Zucman are left-leaning economists in favor of a wealth tax, but Zucman said the real-time inequality meter is not ideological. He said he was well received in an online presentation the authors made Jan. 14 to Dennis Fixler, the chief economist at the Bureau of Economic Analysis; Heather Boushey, member of the Council of Economic Advisers; and Danny Yagan, the chief economist of the Office of Management and Budget, who collaborated with Saez and Zucman on research before taking time off from Berkeley.

A spokeswoman for the Bureau of Economic Analysis declined to comment on the real-time inequality meter, but gave me a month of December work document by Fixler and others showing that the agency is working to provide a similar measure. “The main obstacles to producing such estimates are the lack of available quarterly microdata and the inability to follow households over time,” the paper says. The other agencies did not respond to requests for comment.

In an interview Tuesday on the Real-Time Inequality Meter, Zucman said, “I think this is going to be a paradigm shift in how people analyze the economy.” He added: “Before, we only talked about growth because there was no data on inequality. I think this tool will change the conversation. I’m not saying that’s the last word. This is the first step. It’s a prototype.

Economics is the least socioeconomically diverse of the major fields of study awarding a doctorate by key measures, according to to research by Robert Schultz of the University of Michigan and Anna Stansbury of the Sloan School of Management at the Massachusetts Institute of Technology. Among PhD graduates born in the United States between 2010 and 2018, only 14% had no parent with a bachelor’s degree or higher, and 65% had at least one parent with a graduate degree. .

By both measures, economics was less diverse than any other major field, including engineering and math. The top-ranked programs are even less diverse, they found. The researchers limited their study to US-born PhDs (who account for about 30% of the total in economics) because parental education has different implications for socioeconomic status in other countries.

“Agricultural workers are not agricultural tools; they are not workhorses to be used and thrown away.

— Cesar Chavez, in a address at the Commonwealth Club of California in 1984

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