At the Truth on the Market blog, Todd Henderson of the University of Chicago Law School (no relation) looks at data published recently on Slate.com showing rising income inequality.
While ducking the debate over whether such stratification is a good or bad thing, Henderson notes that the article makes what he calls a “startling admission”:
?[I]t would be hard to argue, based on this data, [that tax cuts] were a major factor.?
Henderson includes a couple of charts showing median compensation over the past several decades, and also plots CEO pay compared with the stock indexes. His conclusion: When CEOs started getting stock options in their compensation packages, their pay started rising dramatically.
The solution for rising income inequality? An expansion of what (yes) George W. Bush called the “ownership society.” As more and more wage earners own pieces of corporate America, the more able they are to accumulate real wealth.
Henderson:
So, in other words, it may be that the growth of income inequality is driven by the top 1 percent getting more income from investments. If this is the case, then policies like Social Security and defined-benefit pension plans (pushed by labor unions) are somewhat to blame for this trend not being experienced more widely. Policies that push ownership and investments down the income curve, like stock options for employees and 401(k) plans, may help reduce the problem of income inequality without more government intervention.
(Hat tip: Walter Olson)
