Must-Read: Thomas Piketty, Emmanuel Saez, and Gabriel Zucman: Economic growth in the US: A Tale of Two Countries

Must-Read: It’s not robots or technology or trade: it’s policy that has caused U.S. income stagnation over the past one and a half generations. Making America much less egalitarian in the economic sphere is what Reagan and his coalition said they wanted to do. And, lo, they have done it. It did not have to be this way:

Thomas Piketty, Emmanuel Saez, and Gabriel Zucman: Economic growth in the US: A Tale of Two Countries: “Given the generation-long stagnation of the pre-tax incomes among the bottom 50% of wage earners in the US…

…policy discussion… should focus on how to equalise the distribution of human capital, financial capital, and bargaining power rather than merely the redistribution of national income after taxes. Policies that could raise the pre-tax incomes of the bottom 50% of income earners could include:

• Improved education and access to skills, which may require major changes in the system of education finance and admission;
• Reforms of labour market institutions to boost workers’ bargaining power and including a higher minimum wage;
• Corporate governance reforms and worker co-determination of the distribution of profits; and
• Steeply progressive taxation that affects the determination of pay and salaries and the pre-tax distribution of income, particularly at the top end.

The different levels of government in the US today obviously have the power to make income distribution more unequal, but they also have the power to make economic growth in the US more equitable again. Potentially pro-growth economic policies should always be discussed alongside their consequences for the distribution of national income and concrete ways to mitigate their unequalising effects. We hope that the distributional national accounts we present today can prove to be useful for such policy evaluations…