The Wealth Gap in America Is Growing, Too

It is, by now, well known that income inequality has increased in the United States. The top 10 percent of earners took more than half of the country’s overall income in 2012, the highest proportion recorded in a century of government record keeping.

But wealth inequality has been increasing too, as a new study by Thomas Piketty of the Paris School of Economics and Gabriel Zucman of the University of California, Berkeley, shows. In a preliminary report, Mr. Zucman and Emmanuel Saez, also of Berkeley, find that at the very top, wealth is distributed as unevenly as it was in the early 20th century. And the wealthiest 0.1 percent, and especially the 0.01 percent, have left the rest of the 1 percent in the dust.

Source: Gabriel Zucman and Emmanuel Saez

It might help to step back for a minute: What’s the difference between wealth inequality and income inequality anyway?

When economists talk about income, they talk about the money a household or a person earns in a given year. That’s the salary you earned, the rent from a tenant above your garage and the bit of money you made by selling some stocks. Your wealth is the value of your assets - your retirement accounts, your home, the unsold stocks - minus your debts, like your credit-card bill and your mortgage.

Numerous studies have shown income inequality growing since the late 1970s. Real earnings have fallen for many families, with globalization, the decline of unions and technological innovations eroding workers’ wages. But earnings have soared at the top, with corporate executives and families with significant income from investments making out especially well. Here’s a famuos U-shaped chart from Mr. Saez and his frequent co-author Mr. Piketty, showing that phenomenon:

Source: Thomas Piketty and Emmanuel Saez

Surveys have generally shown wealth inequality growing, but more slowly than income inequality. Wealth might be more concentrated among fewer families, in other words, but that trend has changed less over time. Here’s a chart from the Economic Policy Institute, showing the distribution of wealth since the early 1980s:

Source: Economic Policy Institute

But Mr. Zucman and Mr. Saez show a dramatic increase in wealth inequality at the very top of the distribution, among households with more than $20 million in wealth - and especially among those with more than $100 million.

Source: Gabriel Zucman and Emmanuel Saez

The two economists developed a new technique for measuring the wealth distribution, using federal tax data and information on the returns to different asset classes. They then took a very close look at the wealth of wealthy Americans. They found that the so-called “middle rich” have actually been losing ground, wealth-wise, while the super-rich have accounted for a bigger and bigger share of the pie.

Source: Gabriel Zucman and Emmanuel Saez

Why? The economists don’t delve too deeply into the reasons, but the “middle rich” might be more reliant on pensions and housing - two categories that have proven soft of late. The very, very rich, on the other hand, might be more reliant on the stock market or corporate earnings.