Growth of Capital Income

The has been a growing argument that as Paul Krugman puts it,

[we] seem to be seeing a general shift in the sources of rising inequality, from inequality in compensation to good old-fashioned capital versus labor.

In other words if you want to get ahead in life, don’t get an education, get rich parents. Or to put it otherwise, increasingly, people who earn loads of money don’t get paid it for their skilled labour, then earn it from returns on capital.

In a new VOX article, based on a paywalled (grrr) article Capital is back: wealth-to-income ratios in rich countries, 1700-2010, Piketty and Zucman give us a few nice graphs. I’m just C&Ping them below…

Figure 1. Private wealth / national income ratios, 1970-2010

Figure 2. Private wealth / national income ratios, 1870-2010: Europe vs. USA

Figure 3. Capital shares in factor-price national income, 1975-2010