From Matthew Yglesias business and economics correspondent of Slate magazine. The graph below shows the lorenz curve with different types of income. Some key points:
1. Distribution of capital income is much more unequal than the distribution of wage income
2. Distribution of business income looks exactly like the distribution of capital income.
3. Capital income is unequally distributed because wealth itself is very unequally distributed.
These points all matter because they point to the existence of two different axes of inequality. One is the wage gap between the high earners and the low or median earners. But the other is the traditional class conflict between the people whose earnings are dominated by work and the people whose earnings are dominated by wealth-possession. In particular, a structural shift in the economy to become less favorable to people who work for a living (including rich people like King James) in favor of people who own things (including the relatively modest fortunes of “middle-class” retirees living off accumulated savings) isn’t necessarily going to do anything to the wage-distribution curve. And yet the clash between peasants and landowners, between factory workers and factory owners, and now between people cheered by the S&P recovery and those saddened by the wage slump is probably the more significant political issue.