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Update on the rising inequality of income and wealth in the US

Tuesday 28 July 2015, by Bernard Zimmern, Valérie

Why focus on the US and not cover other countries? Because inequalities in a developed country like the US does not have much to do with those of a developing country like China where fortunes are being built or like Russia, where relations with the political powers explain most of the billionaires.

The only common point is that inequalities are growing, because the center of the table cloth (see conclusion) is raised in all countries and lifts the rest. But the reasons for the uprising are very different, and rather reprehensible in the Russian case.
The US case is also to be given priority because it is not only the largest economy in the world; but the sources of rising inequality are perhaps the major reason for the success of the West and are the main engine of progress.

Condemning inequality rise could be a far-reaching error because it would condemn our communities to decay and unemployment by misunderstanding the development mechanisms of our societies.


The increase in inequalities ignites since many years economists, politicians and the media. It could be blameworthy because it could be the symbol of a growing social injustice and, even, according to some economists, the explanation of slower growth. Have joined this chorus of denunciation a whole myriad of national and international public bodies, not only the French statistical institute INSEE, but the OECD, the IMF, the World Bank. And The Economist has just added its touch by denouncing the new billionaires as the new "robber barons", those who had transformed America from a rural nation into an industrial nation in the late nineteenth century.

One suspects that this is not a neutral debate, when we see the number of public bodies, who live on public money, engaged in this crusade of the XXI century; one wonders if those who live from public money have an interest in seeing increased redistributive pressure on the rich because redistribution increases their role and the transfers of wealth of which they live.

But in reverse, and this seems to have received little debate, one may wonder if this great campaign for greater equality is not currently creating inequality by targeting the very people who create growth, and create jobs, those who have become rich because they innovate and take risks.
One may wonder if this great crusade against inequality is not a crusade that kills the essence of Western development.

True, some may promote asceticism, preaching that happiness does not lie in the growth of material goods but in the spiritual. This is perfectly justifiable when your stomach is full but you can question whether this is the more desirable when much of humanity still does not know how to feed their children; or when a quarter of young people have for future horizon only state subsidies.

This is why the debate on increasing inequality is a fairly central debate for our future as a civilization.

The first question that must be asked is: is there really an increase in inequality? As we will see, the answer is positive, even if the increase is much lower than claimed by its whistleblowers.
The second question is: these whistleblowers accuse inequalities to favor the rich and even the very rich. But are the rich always the same? And here, the answer is frankly no.
But if the rich become, for some, much richer, is this immoral or unjust? And if the rich were those who create growth? What if, by removing or denouncing them as recommended by the champions of the crusade against inequality, we were removing the very engine behind growth and innovation?


Thomas Piketty and Emmanuel Saez were among the first to denounce the rise of inequality and made themselves known by an article "Income inequality in the United States, 1913-1998", published in Quarterly Journal of Economics, vol. 118, No. 1, 2003. They have since been joined by a number of economists whose concurring theses eventually made a common creed by most economists that there was a rise of inequality and that this increase was blameworthy.

In this egalitarian concert, the best-known names are : Joseph Stiglitz, who was a Nobel laureate and president of Council of Economic Advisers under Bill Clinton, Anthony B.Atkinson, a British who notably worked with Francois Bourguignon, Edward N. Wolff known for his work on the SCF (Survey of Consumer Finances), François Bourguignon who has been a member of the Economic Analysis Council in France, a chief economist of the World Bank and has replaced Thomas Piketty at the head of ’Economic School in Paris, Anthony F.Shorrocks, also a British economist who wrote the report on large fortunes for Credit Suisse.

Economists who have adopted a much more cautious or frankly contrary view are very few: we know in the USA Richard Burkhauser, professor at Cornell University,Terry J. Fitzgerald economist and vice president of the Federal Reserve Bank of Minneapolis, and Arthur.B. Kennickell, a researcher with the Council of Governors of the Federal Reserve Bank.

I.A. Take care.

Having ourselves evaluated claims in Thomas Piketty’s 2011 manifesto "For a tax revolution" about government levies, we published in a major daily, figures published by the same Piketty and concluded without encountering any reaction that he had at minimum faked his presentation.

It happened the same with François Bourguignon, a member of the same group, who had submitted to the Council of Economic Analysis, around 1999, a report concluding that government levies on income in the USA was comparable to French levies; in " Les Profiteurs de l’Etat", an essay of which more than 50.000 copies were sold, we had shown that Bourguignon had made mistakes representing 11% of GDP, the size of an error that could not commit an economist ...

More recently, Thomas Piketty had claimed that the median income of an American household had only increased by 3% between 1979 and 2007.
Richard Burkhauser had shown with two of his colleagues that in reality if one corrects for inflation and the change in household composition during this period, the growth is around 35% and Terry Fitzgerald that, with a few other corrections, it could even go up to nearly 60%.

I.B. The results depend on what we measure

Most work on inequalities, including those of Piketty, rely on gross income calculated from tax returns. Those who pay no tax are estimated by different routes, which necessarily enthuses some arbitrary decisions.
It is the income that is termed primary income or market income.

It seems more honest to work on secondary incomes, after integration, to the highest income taxes that reach in the USA an average around 25% , and for the low incomes government subsidies; in all Western countries, they now represent several tens percent of GDP and are largely directed to the poorest. Thus in the USA, the amounts of direct aid as "Food stamps" or health as Medicaid, exceed $ 500 billion for a GDP of 17 trillion and a federal budget of 3.600 billion.

In defense of Piketty & Co, it is true that primary revenues from tax returns are easier to establish and with fewer assumptions on distributions; they are also more comparable across countries because most countries have an income tax.
But redistribution policies have been widely implemented in Western countries to precisely limit the inequality; staying with series based only on primary income is a bit out of touch.

Many researches have allowed major Western countries like the US to establish the evolution of the distribution of income from secondary income.
But even in these works, there are wide disparities according to the extent of the corrections, if one incorporates the redistribution of goods in cash only (pensions, unemployment insurance, etc.) and also redistribution in kind (free education, free health).

For example, we reproduce below the results of various changes in income distribution quantiles obtained by the CBO (Congressional Budget Office) and by other researchers. We must be careful not to take each of these outcomes as truth because there is not only an element of scientific uncertainty in each study but even a touch of ideology. For instance, it should be reminded that the CBO was established by a Democratic Congress and its director has been always chosen by the Democrats and that his studies are often biased in favor of theses defended by the party.

These graphs below are from What If We’re Inequality Looking at the Wrong Way? , A blog published by Thomas B. Edsall June 26, 2013 in "The Opinionator".

The first chart is based on the CBO publications.

The second graph is from the work of Burkhauser, a professor at Cornell, and his colleagues in 2011 and shows much lower growth differences, after various corrections including integration in the redistribution of income in cash and in kind, as Medicaid (health assistance to poor) and taking into account the change in the size of the units used to determine the quantiles or centiles.

In 2013, Burkhauser returned to the 2011 figures and, on a somewhat later period, managed to show an inverse relationship:

Change in income by quintile and for the top 5 percent using Burkhauser’s measure of "household size-adjusted post-tax, post-transfer income plus in-kind income" plus "accrued capital gains, Including housing."

Let us say immediately that Richard Burkhauser is a professor of economics respected even by his opponents and is therefore not considered a fantaisist.
But to achieve this surprising result, he had to integrate in the income the potential capital gains of the wealth.

Egalitarians cannot criticize this approach as in "For a tax revolution", in the middle graph (page 52) showing that the rich pay less than the poor, T. Piketty has included in the income, firms undistributed profits.
But it seems to go a little too far, as the period before 2008 was the time of an estate bubble that has benefited particularly from the 2nd to the 5th deciles.

It seems less objectionable to cite the results published by Richard Burkhauser in its work in 2009 [1] where he sums up the work of Piketty and Saez and found results consistent with theirs.

We know that those incomes are primary income, not secondary income after social transfers, but they can be used to measure changes and they can rally the agreement of almost all significant economists.

The sharp climb between 1992 and 1993 comes from a change in the statistical method


From curves above, the percentage of total household income in the US is growing from 1967 to 2006, from 11 to 12.5% for the population between the 90 and the 95th percentile, from 12.5 to 15.5 % for the population between the 95 and 99th percentile but from 6.5 to 10 (if we remove the jump due to a statistical change) for the highest percentile.

This is the point that Piketty points out in Capital in the XXI century Page 467: "It is observed that most of the increase comes from the group" 1% ", whose share in national income has increased from about 9% in the 1970s to about 20% in the years 2000-2010 ".

This is what the CBO notes indicates: without the last percentile, income inequality would have increased in the US but not as much. The Gini index for market income (primary) increased from 0.479 in 1979 to 0.590 in 2007, an increase of 23% but would have increased from 0.435 to 0.495, a 14% increase when excluding the 1 % of households with the highest income.

This is also what Piketty spends his time hammering: it would have been impossible to measure the extent of inequality "... using a synthetic indicator of inequality such as the Gini coefficient ..." (page 451 of the Capital in the XXI century).
Note that this is the same phenomenon that is found with wealth distributions, that has been noted by sources as diverse as Forbes magazine or the magazine Challenges in France when it is indignant that the wealth of billionaires are increased 700% from 1996 to 2013.

The relationship between income and wealth was remarkably illustrated by another economist, Arthur B. Kennickell, in "Ponds and Streams: Wealth and Income in the US, 1989 to 2007", research conducted on behalf of the Board of Governors of the Federal Bank relying on the triennial survey "Survey of Consumer Finances" SCF.

The diagram below called copula [2] illustrates the connection between income and wealth, where the height of the surface gives the frequency observed for each point defined by the X and Y coordinates, describing income and wealth.

This diagram illustrates that there is a very small fraction of the population that has both a great wealth and a great income. But is it always the same? If there is competition to stay on top, this competition is it not what is needed to lift the boat of everyone? This is the pattern of the table cloth (see conclusion) beautifully represented by the copula.


Many studies have been devoted to the issue of income mobility and / or wealth. Those at the top or in the lowest income are not always the same.
Instead of taking the distribution of income at given times, regardless of who is in each decile or centile, the researchers follow people over time to see if they change classes.

One of the most serious studies is published in the National Tax Journal by Gerald Auten & Geoffrey Gee’s Office of Tax Analysis US Department of the Treasury, Washington, from revenue taken from income tax; and it gives a good measure of mobility.
The study noted that the top decile of income rose from 1960 to 2005 of 44.1% of total revenues to 50.4% while the share of the bottom quintile regressed from 4.2 to 3.4%.

But as the great economist Joseph Schumpeter said, those who occupy the more expensive hotel or lofts are not always the same:

::  About half of those in the lowest quintile in 1996 had left in 2005;

::  Median income excluding inflation had increased by 24% and the median income of the poor had increased in 2005, while those at the top in 1996 saw theirs shrink;

::  Quite dramatically, only about 40% of those in the top 1% at the beginning were still there at the end, and only a quarter of those in the top 1 per 10,000;

::  These measures of mobility in the 1996-2005 period have remained very similar to those of the period 1987-1996; since inequalities were increased, income mobility in absolute value also increased so that the relative mobility has remained the same in 20 years.

One of the advantages of this survey is that it also covers a large number of those in the highest income and that it is still possible to draw meaningful conclusions on these statistical categories.
The findings are particularly enlightening:

::  An income volatility which increases with income because in 10 years, 50% of those in the top centile were gone but 75% of those in the first ten thousandth.

::  25% of those in the top ten thousandth have seen their income increase and 14.6% of them have at least doubled but 60% of them have also seen their income drop by more than half.

::  The conclusion is that to figure in the highest income is extraordinarily transient.

The factors explaining this mobility are age (younger generally start in the lowest quintile but rise with age), family status (which raises from 6 to 16 centiles on getting married). the fact to start a business (it was up from March to May in the 87-96 survey but this influence seems to have disappeared in the 96 to 2005 survey).

A graph published by the same authors in another article dramatically illustrates the effect of age:


For many economists that can qualify as politicians, that support or rely on political parties, rising inequality is bad in itself.

Example: Joseph Stiglitz and his book "The Price of Inequality" in which he claims to show that more inequality leads to less growth.
However, in a recent report, the OECD has established a long list of papers along the lines of Stiglitz and others going in the opposite direction and has felt obliged to make a very long mathematical study to finally show that, yes, inequality decreases growth, but a point of Gini is a drop in growth of 3% in 5 years; this is very little change with regard to the variability of all parameters (think only of the arrival of President Reagan to the US presidency in 1981, of Margaret Thatcher as prime minister in the UK in 1978 or of Chancellor Gerhard Schroeder’s socialist with Hartz (2003-2005) in Germany) which upset the growth of their respective countries without leaving time to the Ginis of these countries to change (even if their action has changed inequality, which seems not to have been studied ...).

Another perspective: what is the reason for inequality to rise? This has not generated a lot of research.

Piketty, cited as the economic guru by L’Observateur, treats this subject in a way we can consider as childlish (see Appendix 1). This is what Bill Gates confirms politely in his blog.

Many theories have been devoted to this question, including the replacement of manual labor by the expertise coming from education and intelligence, the effect of age and aging population, globalization, immigration, the increase in high income by the change in tax laws, the drop of low-incomes by the decline of unions.

A fairly widespread idea, disseminated from the statistics of the CBO and Piketty and Saez is that rising inequality was due to the rise of salaries of senior managers and top executives.

But this idea is based on the observation that salaries constitute the largest item of income of the richest; and as regard the top 5% and, above all, the last centile, this observation is totally false: notably, one will see from Kennickell studies of the income of the richest, the share made up by "business" and capital account for two thirds of income, and wages less than a third. The percentage of entrepreneurs through income "business" and capital is very low in the income deciles up to the 10th decile but then increases rapidly when climbing up the income scale; and this percentage has increased in recent years while the share of wages regressed.

This indicates that entrepreneurship is the key factor behind rising inequality and that, far from being a brake on growth, it could be the key agent; and it would be absurd to fight against growing inequalities, we should instead encourage it. When seeking to curb this growth by taxing riche people, egalitarians are encouraging stagnation and unemployment.

That is indeed the very hypothesis raised by The Economist even if the presentation of their paper is conspicuously biased by ideology.

The thesis of The Economist is that the world is currently witnessing a rise of very large fortunes associated with the explosion of information technology, and creates the "Sultans of silicone", like the late nineteenth century had seen the transformation of an agricultural nation into an industrial nation with a series of very wealthy capitalists; the magazine compares Bill Gates, Mark Zuckerberg, Jeff Bezos, etc. to the Rockefeller, Morgan, Carnegie. The ideological bias is that it takes an old theme of the socialist left that has historically been proven false, by calling them "robber barons"; like the pirates ransoming boats on the Rhine river, they were supposed to live an unfair monopoly; the truth is that a very large part of these capitalists fled the intervention of the state and lived already with a philosophy near the one of Ayn Rand.

This is why, for public policies and the future of our societies, it seems important to develop research into the causes of rising inequality, to find what part in this rise play entrepreneurs, who create businesses and help disseminate the benefits of innovation into our societies.

Three sets of data are relevant:

I. The concentration of entrepreneurs in income distribution

We have seen that revenue growth was even stronger as the revenues were higher but this concentration parallels that of the percentage of entrepreneurs as one moves up the income ladder.

II. The source of the wealth of billionaires Forbes series

This series, which, for the USA, began in 1983 can show that among the 400 Americans having the highest wealth, 67% now have created their fortunes by creating companies and 90% if we include their parents. This percentage of 67% was only about 50% in 1983 and joined by The Economist observation that many of these new capitalists have created their fortunes by relying on the explosion of the digital economy, as the capitalists of the XIXth century on the railway, oil and electricity.

These figures have not been disputed - Forbes series is considered by most experts as one of the most serious and in fact is used by the egalitarian Shorrocks to refine his calculations on large fortunes.

But it is a terrible thorn in the foot of egalitarians and efforts were made to try to reduce its scope.

The most important was to say that these billionaires are not starting from scratch and they were already very rich when they began; take for example the Koch brothers, or even Bill Gates, the man richest in the world for the moment. He would have started in IT because his parents were able to pay him studies at a leading university which gave him the first step on the ladder.

One of the most comprehensive studies, devastating for egalitarians, is "Lessons from the 400 wealthiest" by Kevin W. Capehart "(2014). It shows that the tenfold increase in the wealth of the richest 400 between 1983 and 2013 is not due to the growth of billionaires on the list already in the beginning but by the entry of newcomers like Bill Gates or Warren Buffet. [3] This adds to the doubts that could have on the effect on the growth of the rent and would reinforce the idea that the increase in wealth of the richest is mainly due to their entrepreneurial capacity.

III. Where does come from the revenue growth of the "1%"?

If the testimony brought by the Forbes series the role of entrepreneurship in the growth of inequality is important, it concerns only 400 people out of nearly 200 million households.

It is therefore interesting to explore what happens to the 1%.
The 1% is the percentile of the population whose income is highest.

A second understanding is that it’s the hundredth of households whose wealth is the highest.

Although as we have seen (see copula Kennickell supra), the two are closely linked, the sets of individuals involved are not identically the same.

The researcher who has devoted the richest statistical documentation, nearly thirty of "working papers", is undoubtedly Arthur. B.Kennickell, attached to the Federal Reserve Board.

It relies on one of the richest statistical surveys that he has followed since its inception in 1983 and covers assets and income of American households, SCF (Survey of Consumer Finances).

Two researchers have compared results from the IRS and the Fed and show that, in absolute terms, there can be considerable differences in the results depending on what we measure.

The outcome of the IRS covers a much larger number of homes but simultaneously, it is silent on households that do not report tax, approximately one third of households.

It is a defect that affects the SCF as it builds its investigations on the IRS basis. It concerns a very limited number of around 4,500 homes; but it compensates for this by outnumbering the sample with the highest incomes; and it also covers a number of issues much broader than what can cover the 1040 form and printed schedules which are used for tax returns.

The 1%, the bane of egalitarians.

All egalitarian have attacked the "1%", indignant that it holds between 30 and 40% [4] of the entire wealth of US households and it receives some 20% of revenues. They are denounced as hoarders, profiteers, who live only on rent, whose fortune, at best, comes mainly from inheritance. Thus in The Price of Inequality, Stiglitz writes (page 370): "... the maximum tax rate should be significantly higher than 50% and possibly 70%. And that these researches [on tax systems, Ed] did not take into account the degree to which these revenues come from rent ".

After denouncing the rent on 900 pages in the Capital in the XXI century, Thomas Piketty suggests that the rising inequality of the 1% comes from rising high wages and, based on his high divination, that this rise is the result of the rise of salaries of senior executives and senior managers.

SCF statistics (see table below [5]) demonstrate instead that:

The wealth of the richest 1% essentially consists of shares in a closely controlled company ("closely held" [6]).
• That the 1% has more than 60% of all American entrepreneurial wealth through these companies, what is coherent with Wolff observation that 75% of the 1% are small entrepreneurs and adds up by showing that these small entrepreneurs represent about 40 % of all US industrial wealth when including open or even listed companies.
• That going from industrial wealth to income, income from business activity in 2007 represent about a third of income, against a little more for wages, but far beyond wages if we add the income derived from industrial investment, dividends, interest, and capital gains (even if part of capital gains is real estate).
• That, historically, there has been a rise of these assets and of industrial revenue since the SCF exists, which alone explains the rise in inequality. Indeed, the industrial wealth of the 1% went up from 7,399 billions in 1989 to 18,466 in 2007 representing an increase of 11.067 billion whereas the assets of 1% went from 8,538 billions to 21,864, an increase of 13,326 billion. Rising industrial wealth has been responsible for 83% of the increase in wealth.

"Ponds and Streams 1989 to 2007".


For the one who approaches the study of the distribution of income or wealth, it is a priori quite disturbing to discover that those whose income or assets are highest are also those for whom such income or assets rose faster.

Jealous and ideologues accuse the law of capital returns, law called compound interest: indeed, it allows to consider an exponential revenue growth. A penny placed at 5% in Roman times would have, to date, produced an amount representing the size of the Earth into pure gold.
But the disturbing about this explanation is that everyone benefits from this law and that therefore the whole world should end billionaire.

A first objection is that these are not the same people who are at the top every year. As we have seen in the 2nd part about Forbes billionaires, of the 140 billionaires of its first edition in 1987, in 2012, 25 years later, only 24 remained continuously in this list. And especially the considerable increase in their assets is for 90% due to new entrants, not to the rise in the patrimony of those already present on the list at the beginning.
This calls for the great theory of Thomas Piketty of capital accumulation.

But another explanation seems more relevant, we call the model of table cloth: If we imagine an table cloth, laid flat on a circular table and we start to raise the canvas by a finger through a hole at the center of the table, the canvas takes the form of a small mountain in the center, with stiff slopes toward the center, gentler going outward. For those who know some math, the section is that of a chain, which is also that of the sides of the Eiffel Tower.
This section or cuts well represents the statistical distribution of income or assets, except that it is not strictly a chain, but a Pareto curve.
In the center are the rich, outside the poor.

The copula designed by Arthur Kennickell (see Part 1) is a good representation.

It is then intuitive that if you want that on average the surface of the table cloth up by x%, it is necessary to raise the center much more. In other words, the growth of the wealth of all requires a much stronger growth by the richest.

But the descent along the surface of the table cloth is also much faster when you are in the center than on the periphery, as we have seen in the study of mobility.

One may wonder what is the force behind the finger that raises the center. It probably changed over the centuries, beginning in the Middle Age, by the physical strength and courage that allowed the lords to emerge and build their castles in the center of the canvas.

But since the industrial revolution, it is clear that this finger has become the business, because it is most often by their companies that people got richer, more rarely through their artistic or sporting talents.

Thus, from 1997 to 2010 [7], in 13 years, global GDP rose from 46.9 to 74.4 trillion dollars, an increase of just below 60% but the number of Forbes billionaires increased from 486 to 1011 and total assets of 1.200 billion to 3.600, a tripling.

Perhaps the twenty-first century will find other ways to raise the canvas. Perhaps it will be shown that the way to get rich is to be a politician (which we doubt). Or simply that there is no need to raise the table cloth because everyone is out of misery.

For now, with a good part of humanity living on less than a dollar a day, who cannot enjoy Kant and Beethoven as pressed by the need to eat or to feed their children, it seems we have a few years when the slogan of the Chinese Communists, "enrichissez-vous," reminded by Emmanuel Macron, is still fully valid, even if we cannot prevent some people to preach happiness by asceticism.


The superficiality of the work of Thomas Piketty

A priori, for our famous economist, it is clear that increasing inequality is unjustified, is to be avoided by itself. This is the question to which he is devoting much of some 960 pages of "Capital in the XXI century" and is trying to convince us that the main engine of growth is rent.

Despite the flood of statistics in which he tries to drown the reader (one of his favorite devices), his naiveté is astonishing.

For example, he was surprised (page 626) that in their seventies or eighties, some can become richer than during their fifties or sixties: "Obviously, this spectacular enrichment of octogenarians is not explained by income from work or their entrepreneurial activity: it is hard to imagine the creation of start-ups every morning." Perhaps because he has known only the middle faculty or researchers from the EHESS, he cannot imagine that we can continue to work and work hard after the official retirement age of 65 or 68.

He never asked why Rupert Murdoch continues to work hard to develop his empire and why Sam Walton, who was for a time the richest man in the world has continued to work to the end. His only explanation is found in compound interest that would make one becomes richer at 85 than at 60 (page 627).

This is where we see the danger of intellectuals totally disconnected from reality.

But it is more interesting to see the storyteller at work on the substantive issues that are central to the debate: why inequality is growing?
"A large part by the unprecedented rise in wage inequality and in particular the emergence of extremely high salaries at the top of the hierarchy of wages, especially among the executives of large companies" (page 471). In support of this tirade T. Piketty uses two graphs 8.7 and 8.8 to prove his point. Both represent the same evolution, one for the top decile, the other for the top centile. It shows three curves similar in their forms: the upper two are from the decile (or centile) higher in national income, one with capital gains, the other without capital gains, the curve the lowest is the share of decile (or centile) in payroll.

It is clear that there is a certain parallelism but in income decile or centile, wages are only a part, about one third (see Kennickell) and entrepreneurial income (see Part III) is becoming increasingly more important while the share of wage income is stationary. It is almost certain that the entrepreneurial revenues also changed as the share of the decile or centile in national income and that the two graphs do not represent a proof of the assertion that precedes them.

The claim that rising inequality is due to the rise of super managers is repeated pages 500-501 with supporting graphs showing the share of the top centile in national income but never show how the wage income of super managers represent the major part of this income. We have data from Kennickell rebutting this assertion.

We see in fact the graph below that the share of wages (black curve) in income is greater for incomes up to the last 5 percentiles but becomes lower than the income of the business (companies run by their owners ) (red curve) and above the sum of business and income from capital (including shares) (blue curve).

The other assertions are made with the same superficiality:

Page 473, wage mobility is handled in the same way: "by calculating average wages obtained at the individual level for long periods (10, 20, 30 years). It is noted that the increase in wage inequality is the same regardless of the duration of the reference period chosen "(page 474). It is not clear why take the average height of the feet of a surfer coming down a wave informs us on whether he passed over the top of the wave and came down.

What bothers him most is the existence of lists like those of Forbes billionaires. He refuses to see that about two thirds were created by entrepreneurs in their lifetime and not inherited. He absolutely wants to see in the growth of the fortune of Liliane Bettencourt, heiress of L’Oreal, the evidence that capital feeds on itself to grow. It might as well take as an example Bill Gates, whose fortune has doubled since he left the reins of the company to Steve Ballmer. This is still a rather infantile vision because L’Oréal has had its growth thanks to the choice of some remarkable leaders - and the dynamics of the industrial sector where the founder was launched, a phenomenon that is found also in the continued expansion of fortunes by octogenarians. But it is far from being the law, many billionaires do not stay billionaires.


Reference list

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Richard V. Burkhauser, Shuaizhang Feng, Stephen P. Jenkins, Jeff Larrimore. Recent Trends in Top Income Shares in the USA: Reconciling Estimates from March CPS and IRS Tax Return Data. NBER Working Paper 15320. September 2009.

Richard V. Burkhauser, Jeff Larrimore, Kosali I. Simon. A "Second Opinion" on the Economic Health of the American Middle Class. NBER Working Paper 17164. June 2011.

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[1Burkhauser, R., 2009, "Recent Trends in Top Income Shares in the USA: Reconciling Estimates from March CPS and IRS Tax Return Data", NBER Working Paper 15320.

[2Copula, a kind of distribution with uniform margins. To make Such a plot here, net worth and income gains For Each box Were Transformed to the equivalent percentile point of Their Own distributions and divided into ordered groups of 5 percent. Cases Were Then cross-classified by Their positions in the two sets of 5-percent groups and has Surface Was computed over the Underlying percent of all families Estimated to be in Each 5-by-5 group. Note That by definition, the sum of all the Underlying values is 100, the sum across the income (net worth) Any axis for 5-percentile group of net worth (income) is exactly 5 percent, and the maximum value for Any square is 5 percent. If net worth and income independent Were contents, each square underling Would Have the average mass, one-quarter percent.

[3Decomposing the 1.807-billion-dollar-constant Increase in the wealth of the 400 wealthiest Americans entre 1982 and 2013 in Such a Manner, incumbents added about 273 billion constant dollars (qui Buffett of about 21 percent Contributed all by himself) and Incoming added about 1,652 trillion (of qui Gates Contributed about four percent), while decedents Subtracted about 57 trillion (of qui Ludwig Subtracted about eight percent), other dropouts Besides renunciants Subtracted a similar dollar amount (about 61 trillion, of qui Nelson Hunt Subtracted about four percent), and a negligible amount renunciants Subtracted (less than one billion constant dollars).

[4In passing, we note that the heritage of the highest income percentile is significantly lower (17 trillion $) that the heritage of the richest percentile (21.8 trillion) or 22% less because most high incomes do not necessarily have the highest heritage. Conversely, the richest percentile in 2006 saw its revenues to 1.603 billion while the income of the highest income percentile was 2.097 billion, 23% less.

[5One of the strengths of statistics Kennickell is it does not agglomerate all income of the highest decile, but distinguishes between income or assets the 90th and 95th percentile, 95th and 99th and the hundredth , avoiding any increase decile or percentile by weight of the highest percentile.

[6If we understand, with more than 5 shareholders bound by a pact.

[7We took 1997 and not 1987, when the first list of Forbes, to make sure that coverage was good world.

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