Many pundits argue the biggest problem facing America today is income inequality. But the important question is, how much is this disparity growing? If inequality is growing at a massive rate—with the wealthy getting virtually all the gains of a growing economy—then policies aimed at simply “growing the pie” are unlikely to be successful. But if the growth of inequality is slowing—which this study shows to be the case—then a combination of growth and “opportunity” policies is what's needed. Without turning around America's anemic productivity growth—which has been slower since the end of the Great Recession than at any time since the federal government started measuring it in the late 1940s—it will be impossible to restore robust and consistent wage growth for most American workers.
Much of the current narrative about massive increases in inequality stems from the work of economists Thomas Piketty and Emmanuel Saez. Over the last 15 years, they have claimed that the richest 10 percent of Americans have reaped up to 90 percent of the benefits of growth while the bottom 90 percent's living standards have stagnated since 1973. In fact, Piketty and Saez's updated data show the median U.S. income in 2014 ($29,200) was lower than in 1967 ($30,012).
But much of their analysis is flawed. They cherry-pick data and make questionable methodological choices that maximize the jarring effect of their findings—vastly overestimating the true rate of inequality growth. This report takes a careful look at their research and highlights critical flaws, such as:
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