Episode Summary
Executive Summary: The episode examines a viral claim that $80 trillion has shifted from the bottom 90% to the top 1% since 1975. Using RAND’s methodology, it explains this as foregone income under a hypothetical world of even wage growth, not an actual wealth transfer. The segment clarifies what the numbers do and do not show, and notes that taxes, growth rates, and wealth are separate issues.
Main Topics: Debunking the $80 trillion inequality claim: The host investigates the headline figure circulating in political and media commentary and traces it to RAND research on income inequality. How the counterfactual was calculated: Carter Price explains the method: compare actual income growth for the bottom 90% with a scenario where wages grew in line with the broader economy, then sum the yearly gaps. Historical shift in income growth: The episode contrasts the postwar period of broadly even income growth with the longer era after the mid-1970s, when top earners pulled away. Income versus wealth: The discussion emphasizes that the analysis measures pre-tax income, not wealth, and therefore should not literally be described as a wealth transfer. Tax policy and redistribution: The segment notes that changes in top marginal tax rates may have reinforced inequality trends, but the report itself does not model tax effects or policy interventions. Productivity and who captures gains: Bernie Sanders’ argument—that workers became more productive while the gains flowed to owners and top executives—is assessed against the available data.
Key Arguments: The $50 trillion and $80 trillion figures are not claims about money physically moved; they estimate cumulative income that the bottom 90% would have earned under a more even growth pattern. The method compares actual wage growth for the bottom 90% with the growth rate of the economy as a whole, then adds yearly differences over decades. Income growth was relatively equal from after World War II until the mid-1970s, but since then higher earners—especially the top 1% and 0.1%—have pulled away. The report measures pre-tax, pre-transfer income and does not attempt to explain the causes of inequality or simulate policy alternatives. Calling the result a 'wealth transfer' is imprecise because the underlying data are about income, and some income would have been spent rather than saved. The decline in the top U.S. income tax rate from 70% in 1975 to 37% in 2023 may have contributed to the widening gap, but this is separate from the report’s core calculation. The data are consistent with the idea that workers did not see pay grow with productivity while many top earners, including executives, did. The more recent $80 trillion figure reflects extending the earlier analysis from 2018 to 2023, not a change in the underlying method.
Data Points: Estimated cumulative foregone income: $80 trillion - Newest figure for the income gap from the bottom 90% to the top 1% since 1975, extended to 2023. Earlier cumulative foregone income estimate: $50 trillion - Older RAND paper’s estimate, covering the period through 2018. Annual gap in 2023: $3.9 trillion - The estimated yearly difference between actual income growth and the counterfactual even-growth scenario. Annual gap in 2018: about $2 to $2.5 trillion - RAND’s earlier estimate of the yearly shortfall at the end of the first paper’s time range. Income tax top rate in 1975: 70% - Used to illustrate how U.S. tax policy on top incomes changed over time. Income tax top rate in 2023: 37% - Current top U.S. income tax rate mentioned as part of the policy context. Worker income gain equivalence: about $32,000 per full-time worker - A rough per-worker translation of the $80 trillion figure across the U.S. full-time workforce. Postwar period of even growth: about 25 years - The era after World War II through the mid-1970s when wages and the economy grew more evenly. Peak income groups referenced: top 1% and top 0.1% - The groups identified as pulling away most strongly in the income distribution.
Pivotal Quotes: "This is basically, if I understand it, this is foregone income." — Tim Harford: The host clarifies the meaning of the trillion-dollar estimate. "It's not wealth, it's income." — Carter Price: Price corrects the way the figure should be described. "This works out at something like $30,000 per full-time employee in the US, which does look on the face of it like a big number." — Tim Harford: The host translates the aggregate estimate into a per-worker figure.
Implications: Listeners should treat the $80 trillion claim as a counterfactual income-gap estimate, not literal lost wealth. It highlights long-run inequality growth, but it does not prove a cause or a policy fix.
From the Episode
Maths. Again, looking at the bottom 90% of worker incomes. Instead of what their pay actually grew at, had it grown at the rate of the broader economy, what would have happened? And so we did that for each year. That told us what that gap would have been for that given year. And then we added it all up to get the 50 trillion or the 80 trillion. These two figures are just numbers from two different papers. The first calculated the difference. With this alternative universe up until 2018. The second moved it a few years on to 2023. And so the 50 trillion, which is the older figure, the more recent figure of 80 trillion, this is basically, if I understand it, this is foregone income. This is the total income that everybody in the bottom 90%, the extra income they would have made if the economy grew evenly as it used to, but they didn't. Because it grew unevenly and more money went to the top 10%. Correct. Yeah, we're summing up each year. So in 2018, it was about $2, $2.5 trillion, was that gap. And since then, that gap has grown to more than $3.5, almost $4 trillion each year. But that's a number that makes more sense to me because you sum something up over 50 years, half these people are dead, and maybe.
70%. In 2023, it was 37%. But that does raise a question, because when Senator Bernie Saunders used this number, he talked about a transfer of wealth. But Carter's analysis is looking at incomes over time and not wealth, and it doesn't include data about taxes at all. That sort of language like wealth transfers and so on, is that the language you would use, or would you have a different form of words? That's certainly not the language I use. It's not wealth, it's income. In some sense, because when we look at the cumulative effect of this, it is. Like wealth, but because it's income over time, obviously, a portion of that you spend, some of it you save. So it would be correlated with wealth, but I would not, it is not wealth. And so that's not the maybe not the best way to describe this. Thanks to Carter Price. And that's it for this episode of More or Less. If you've seen a number you want us to take a look at, email us at more or less at bbc.co.uk. Until next time.
Because it grew unevenly and more money went to the top 10%. Correct. Yeah, we're summing up each year. So in 2018, it was about $2, $2.5 trillion, was that gap. And since then, that gap has grown to more than $3.5, almost $4 trillion each year. But that's a number that makes more sense to me because you sum something up over 50 years, half these people are dead, and maybe. The other half have b been born. I mean, it's such a long period of time, but $4 trillion a year I can get my head around. Yes. This works out at something like $30,000 per full-time employee in the US, which does look on the face of it like a big number. So what does it tell us? It's certainly a fresh way of visualizing the magnitude of the increase in inequality. What it doesn't tell us is what caused the increase, nor whether we could actually have tweaked some policy to land us in this counterfactual world where we get all of the extra growth, but none of the extra inequality. Perhaps pay at the top increased dramatically because American entrepreneurs started companies that brought in huge wealth to the US.
About More or Less Behind the Statistics
Tim Harford and the More or Less team try to make sense of the statistics which surround us. From BBC Radio 4