Steven Rattner
July 1, 2014
Understanding and Addressing
Income Inequality

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Piketty’s Important New Book

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Instant Bestseller
Source: NY Times bestsellers list May 11, 2014

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But Weighty and Complex

Trends in Income and Wealthy Inequality
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19.3%
4.1%
18.0%
2.8%
%
Note: Excludes capital gains
Source: Emmanuel Saez, Thomas Piketty
Record Income Inequality in the US
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Wealth Is More Unequal Than Income
Source: Thomas Piketty
33.8%
17.4%
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Source: Thomas Piketty
The Super Rich Have Gained the Most
Decomposing the Top 1%
1%-0.5% 0.5%-0.1% 0.1%-0.01%
0.01%
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US Leads in Income Inequality
Note: As of 2010
Source: Thomas Piketty
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Income Inequality: US vs. Europe
Source: Thomas Piketty
14.7%
17.4%
8.8%
6.9%
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Wealth Inequality: US vs. Europe
Source: Thomas Piketty
33.8%
28.0%
24.4%
20.7%
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State of the Middle Class
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US Middle Class Is Losing Its Lead…
Note: As of 2010
Source: NY Times, Luxembourg Income Study Analysis
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…And Is No Longer World’s Richest
Note: As of 2010
Source: NY Times, Luxembourg Income Study Analysis
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Causes and Consequences
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A Plethora of Causes
 Principal causes:
 Technology
 Globalization
 Secondary causes:
 Tax policy
 Declining unionization
 “Winners-take-all” labor markets
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Skills Matter
Source: Bureau of Labor Statistics
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How Globalization Hurts Wages
Source: Bureau of Labor Statistics
Change in Wages by Sector (Jun-09 to May-14)
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Lower Tax Rates, Higher Inequality
Note: Change in top income shares and top marginal tax rates since 1960
Source: Emmanuel Saez, Thomas Piketty
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Government Transfers Reduce Inequality
Note: As of 2010
Source: CBO, Gary Burtless
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But US Does Less to Redistribute Income
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Note: As of 2011
Source: OECD

Inequality Associated with Immobility
Source: Alan Krueger’s Great Gatsby Curve, Corak (2011), CEA estimates
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But Mobility Has Not Changed Over Time
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Source: “Equality of Opportunity Project” by Raj Chetty , Nathaniel Hendren, Patrick Kline,
Emmanuel Saez and Nicholas Turner

Source: Andrew Berg and Jonathan D. Ostry, IMF
More Inequality May Mean Less Growth
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Source: OECD Income Distribution and Poverty Database and OECD Economic Outlook Database
Or It May Not
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Solutions
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No Silver Bullets
 Education / retraining / vocational training
 More progressive tax policies
 Enhanced social welfare programs
 Increased Federal investment spending (R&D,
infrastructure etc.)
 Fair (but free) trade
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19.3%
4.1%
18.0%
2.8%
%
Note: Excludes capital gains
Source: Emmanuel Saez, Thomas Piketty
In Conclusion
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