I finally got my copy of Thomas Piketty’s blockbuster Capital in the Twenty-First Century last Friday (it was on backorder for almost a month, such is the demand), and have been spending every minute of spare time since reading and pondering it. My brain is getting too full to store all the ruminations, so I’ll start depositing them (along with choice quotes) here, beginning with this little passage on pp. 299-300, which ends with a nice example of Piketty’s trademark wry understatement:
“This unprecedented increase in wage inequality [in the US, 1975-present] does not appear to have been compensated by increased wage mobility over the course of a person’s career. This is a significant point, in that greater mobility is often mentioned as a reason to believe that increasing inequality is not that important. In fact, if each individual were to enjoy a very high income for part of his or her life (for example, if each individual spent a year in the upper centile of the income hierarchy), then an increase in the level characterized as ‘very high pay’ would not necessarily imply that inequality with respect to labor—measured over a lifetime—had truly increased. The familiar mobility argument is powerful, so powerful that it is often impossible to verify.
But in the US case, government data allow us to measure the evolution of wage inequality with mobility taken into account: we can compute average wages at the individual level over long periods of time (ten, twenty, or thirty years). And what we find is that the increase in wage inequality is identical in all cases, no matter what reference period we choose. In other words, workers at McDonald’s or in Detroit’s auto plants do not spend a year of their lives as top managers of large US firms, any more than professors at the University of Chicago or middle managers from California do. One may have felt this intuitively, but it is always better to measure systematically wherever possible.”