Two Federal Reserve economists have recently examined the evidence and concluded the gap is getting even wider.
VALERIE MACON | AFP | Getty ImagesWe know this, but two Federal Reserve economists have recently examined the evidence and concluded the gap is getting even wider.
Federal Reserve Board economists Isabel Cairo and Jae Sim found that the inequality gap has risen because owners of assets like real estate and stocks are benefiting from the rise of corporate power and rising profits, along with the decline of labor. "[T]he before-tax profits share of U.S. corporations has shown a dramatic increase in the last few decades," the authors wrote. The rise of corporate profits was strongly correlated with the decline of labor: "This correlation suggest that the rise of the profit share and the fall of the labor share may have been driven by a common cause."
Stagnating wage growth and higher corporate profits have led to a rise in two forms of inequality: income inequality , and wealth inequality , largely because of capital gains. This is very evident when looking at data on stock ownership. While an oft-quoted Gallup Poll indicated that 55% of households own stock in 2020, it is the very wealthy who control almost all of this asset. A separate Federal Reserve report indicates the top 10% of households by net worth control 87.2% of the equities in this country at the end of the first quarter.
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