U.S. vs. China: Whose income inequality is worse?

Income inequality has become a hallmark of the modern economic era, and it’s not only U.S. citizens who are experiencing the trend.

Widening inequality has been called “one of the key challenges of our time” by the World Economic Forum. It cites the negatives associated with a growing gap between rich and poor: weaker social networks, rising crime and weaker democracies. The ratings agency S&P Global Ratings has cited the income gap as a long-term trend that threatens America’s economic growth.

While the rich have gotten richer, many Americans have been left behind, especially those who lack college degrees. On the campaign trail, President Donald Trump vowed to help revitalize the careers of many of those workers, pointing to what he claimed are trade and labor imbalances with foreign countries such as China and Mexico. To combat such imbalances, Mr. Trump has raised the possibility of enacting tariffs on Chinese-made goods, which would likely decrease demand for Chinese-made products by raising the costs for American consumers.

As the two countries stand on the edge of a trade war, it’s worth asking how their citizens compare economically. In one respect, both China and the U.S. are similar: Both have witnessed an extreme rise in income inequality since the 1970s, according to a new paper from economists including Thomas Piketty of the Paris School of Economics and Emmanuel Saez and Gabriel Zucman of University of California-Berkeley.

The top 1 percent of earners in America now take home about 20 percent of the country’s pretax national income, compared with less than 12 percent in 1978, according to the research the economists published at the National Bureau of Economic Research. Over the same time in China, the top 1 percent doubled their share of income, rising from about 6 percent to 12 percent.