Reply #186: From the Economic Policy Institute's April 2008 study on income trends

[varelse]

Detailed Analysis:

Since investment income primarily accrues to those at the top of the income
structure, any expansion of investment income — as occurred during the 1990s — will lead to
greater income inequality.

Between 1979 and 2000, income derived from capital — such as rent, dividends, interest
payments, and capital gains — increased as a share of personal income from 18.6 percent to 26.9
percent. Over the same period, total labor income — wages, salaries, and fringe benefits — fell
from 75.8 percent of personal income to 71.8 percent.26 Between 2000 and 2005, lower interest
rates and the stock market decline of the early 2000s resulted in a drop in the share of income
derived from capital to 20.9 percent; however, that share remained higher than in 1979.27 Further,
the share of national income growth going to corporate profits during the recent recovery was
considerably higher than average.

Higher-income families benefit disproportionately from the increase in the importance of
investment income, as this type of income makes up a larger share of their total income. Some 86
percent of all capital gains income is realized by families in the top 5 percent of the income
distribution.