These 3 charts explain why the gap between the rich and poor has soared since the 1980s
By Quentin Fottrell and cross-posted from MarketWatch
There’s one area where there’s been huge growth in the U.S. — the gap between the rich and poor.
The divergence in the levels of inequality has been “extreme” between Western Europe and the U.S., according to the 2018 World Inequality Report, released by the World Inequality Lab, a research project in over 70 countries based at the Paris School of Economics, and co-authored by the French economist Thomas Piketty. “The global middle class has been squeezed,” it said.
In 1980, the U.S. and Western Europe had similar levels of inequality. And today? Not so much. While the top 1% of earners made up just 10% in both regions in 1980, it increased slightly to 12% in 2016 in Western Europe, but doubled to 20% in the U.S. “Since 1980, income inequality has increased rapidly in North America, China, India, and Russia,” it said.
“The income-inequality trajectory observed in the U.S. is largely due to massive educational inequalities, combined with a tax system that grew less progressive despite a surge in top labor compensation since the 1980s,” it found. In Europe, tax and wage inequality was moderated by educational and wage-setting policies that were more favorable to low and middle-income groups.
In the U.S., out of 100 children whose parents are among the bottom 10% of income earners, only 20 to 30 of them actually go to college. However, closer to 90 out of 100 children go to college if their parents are within the top 10% earners. What’s more, research has shown that when elite colleges open their doors to students from poor backgrounds, academic performance at the institution doesn’t decline.
Income inequality varies greatly around the world. It is lowest in Europe and highest in the Middle East. In 2016, the top 10% of earners made up 37% of all income in Europe, 41% in China, 46% in Russia, 47% in the U.S. and Canada, and around 55% in sub-Saharan Africa, Brazil, and India. In the Middle East, however, the top 10% capture 61% of national income…