September 27, 2014
Neil Irwin has a useful piece reporting on a journal article by Pavlina Tcherneva documenting the increased share of income growth going to the top 10 percent and especially the top 1 percent. While there can be little doubt about the basic patterns, it is worth noting that the data include capital gains income. This is important because by this measure the change in income shown in any given year will be hugely influenced by the movement in stock prices in the recent past.
For example, if stock prices stay more or less at their current level for the next two years and then we compared the income growth of the top 1 percent in 2016 with the growth in 2012 (after three years of sharp price increases) our numbers would show a sharp fall in the income of the top 1 percent even if nothing else in the economy had changed. While it is worth noting changes in wealth and capital gains, it is useful to examine income with gains (or losses) excluded. If the stock market stabilizes at its current level and the pattern of income distribution has otherwise not changed, the country will not have become more equal.
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