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New Data: Pretax Income Growth

How much has pretax income grown by earner percentiles? The graph here, from Chicago Booth Review’s article New Data: Inequality Runs Deeper than Previously Thought, provides the answer.

So Piketty, Saez, and Gabriel Zucman of University of California at Berkeley combined tax, survey, and national-accounts data to create distributional accounts that they say capture 100 percent of US income since 1913. The new accounts include transfer payments, employee fringe benefits, and capital income, which weren’t in previous data.

The data set reveals since 1980 a “sharp divergence in the growth experienced by the bottom 50 percent versus the rest of the economy,” the researchers write. The average pretax income of the bottom 50 percent of US adults has stagnated since 1980, while the share of income of US adults in the bottom half of the distribution collapsed from 20 percent in 1980 to 12 percent in 2014. In a mirror-image move, the top 1 percent commanded 12 percent of income in 1980 but 20 percent in 2014. The top 1 percent of US adults now earns on average 81 times more than the bottom 50 percent of adults; in 1981, they earned 27 times what the lower half earned.

If you click on the top right of the graph in the article and go to edit chart you can get a table of the data used for the chart.  Great for use in a QL or stats course. Of course Piketty and Saez are know for creating the World Wealth and Income Database, which we have highlighted on this blog before.

About Thomas J. Pfaff

Thomas J. Pfaff is a Professor of Mathematics at Ithaca College. He created this website because he believes that sustainability, ranging from climate change to social justice, should be included in all courses whenever possible.

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