Income Inequality in the United States: the Impact of Super Salaries.

Abstract

Focusing in the United States, this paper addresses the following question: can the increase of top managers' salaries be counted as a source of the recent increase in income inequality? The paper shows that, between 1979 and 2015, the average annual wage for the bottom 90 percent of wage earners increased 80 percent and the average annual wage for the top 1 percent of wage earners increased 160 percent. It further shows that the bulk of the increase in income inequality comes from the top 1 percent, whose share of national income rose from 9 percent in the 1970s to about 20 percent in 2000-2010. It concludes that that the substantial increase in wage inequality (top salaries) can explain part of the recent increase in income inequality in the United States, bearing in mind that race between education and technology and income from capital also played a role.