1 The Pay of Corporate Executives and Financial Professionals as Evidence of Rents in Top 1 Percent Incomes

The debate over the extent and causes of rising inequality of American incomes and wages had raged for almost two decades even before the groundbreaking work of Piketty and Saez (2003) exploded onto the scene. This work reinforced the startling degree to which income growth had been concentrated overwhelmingly at the very top. The P&S data indicate, for instance, that between 1979 and 2007, the top 1 percent of American tax units accounted for 59.8 percent of average growth in cash, market-based incomes, compared to just 9 percent of average growth in this period accounted for by the bottom 90 percent. While including transfers and non-cash incomes reduces the share of growth received by the top 1 percent significantly, they still account for 38.3 percent of growth, more than the 31.0 percent share received by the bottom 80 percent1. In this article we will argue the following. First, this increase in the incomes and wages of the top 1 percent over in the last three decades should largely be interpreted as a redistribution of economic rents, and not simply as the outcome of well-functioning competitive markets rewarding skills or productivity based on marginal differences. Second, this rise in incomes at the very top has been the primary impediment to living standards growth for low an