The U.S. Is a Meritocracy. That Doesn’t Mean It’s Fair.
A study shows that most of those with the top 1 percent of incomes are people who work, not the idle rich. But there’s still inequality.
He did it his way.
Photographer: Andrew Harrer/Bloomberg
Much of the current debate about inherited wealth in a number of Western countries is informed by the notion that most of today’s top incomes are the product of passive returns on financial capital rather than labor. But in a new National Bureau of Economic Research working paper, four U.S. economists stipulate that much of that income actually comes from the returns on the aptitudes, or human capital, of the working rich; these returns are so great because large human capital is exceedingly rare.
In their important 2018 work, “Distributional National Accounts,” Thomas Piketty, Emmanuel Saez and Gabriel Zucman wrote that, “in contrast to earlier decades, the increase in income concentration over the past 15 years derives from a boom in the income from equity and bonds at the top.” This implies that the top incomes of the 20th century — those of top executives, star performers and professional athletes — grew because the richest received bigger pay for work considered unique. Now the elite grows wealthier simply by virtue of owning assets. The authors say the new state of affairs is manifestly unfair, especially since the assets can be passed by inheritance, creating an idle owner class, somewhat like the old aristocracy, that vacuums up much of societies’ cash.