But as the recovery continues, we cannot forget the long-standing challenges that our economy has faced in recent decades. Chief among these is rising inequality—of income, of wealth, and of opportunity. While inequality is a global challenge, it remains especially important in the United States. Since the late 1980s, the share of income going to the top 1 percent in the United States has exceeded the 1 percent’s share in every other G-7 country in each year that data are available. It has also risen faster than in any of these advanced economies. In 2014, the top 1 percent received 18 percent of income, up from 8 percent in 1975.
While some inequality can result from competitive markets providing higher rewards to the most-productive workers, it is important to design our economic policies to promote inclusive growth that is shared with a wide range of households. In particular, a growing body of evidence suggests that much of the rise in inequality stems from cases where markets fail to be competitive. When barriers to competition such as monopolies or preferential government regulations prevent new entry into markets, incumbents can collect more income than their productivity justifies—capturing what economists call “economic rents.”
A wide range of economic policies can help address inequality by 1) promoting equal opportunity for all Americans through high-quality early education and supportive policies for low-income families; and 2) reducing economic rents through effective and thoughtful regulation as well as policies that increase worker voice.
For more information on the challenge of inequality and on the President’s agenda for inclusive growth, check out Chapter 1 of this year’s Economic Report of the President.
