“…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
“Unintended Consequences is full of substance, it is one of the must-read books of the year, and once I finish it I will be giving it a second read through right away.” - Tyler Cowen, Professor, George Mason University
“Unintended Consequences is far smarter and more thought-provoking than most economics written for the general public” - Greg Mankiw, Harvard University, Former Chairman of the Council of Economic Advisors
“Unintended Consequences provides a provocative interpretation of the causes of the global financial crisis and the policies needed to return to rapid growth. Whether you agree or not, this analysis is well worth reading.” - Nouriel Roubini, New York University; Chairman, Roubini Global Economics
“There are an amazing number of good ideas and interesting points made in Unintended Consequences. The thinking underlying it, and the obvious depth of understanding of the author, are very impressive.” - Steven Levitt, coauthor of Freakonomics; 2004 John Bates Clark Medal
“…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
“…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
“A full-throated defense of economic dynamism.” - The Wall Street Journal
“…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
“Unintended Consequences represents the most cogent and persuasive analysis of the Financial Crisis to date.” - Andrei Shleifer, 1999 John Bates Clark Medal Winner
“Unintended Consequences should be read by anyone who takes for granted the superiority of progressive taxation and has not thought carefully about the trade-offs involved.” - The New Republic
“…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
AI Summary.The authors estimate that more than half of the rise in the top 1% income share since 1985 — 5.8 of 10.5 percentage points — flowed through pass-through businesses, counting roughly 3m wealthy private business owners with average net worth near $25m running law firms, dealerships, and medical practices.
Torsten SløkApollo
Date Posted:
Is Database:
Database
Is Important:
Important
More than half the increase in the top 1% income share since 1985 flowed through pass-through businesses to ~ 3mm private business owners with a mean net worth of ~$25mm.
Did most of the top 1% income gain come from private businesses?
Core argument: Owen Zidar and Eric Zwick find that 5.8 of the 10.5 percentage-point rise in the U.S. top 1% income share since 1985 flowed through pass-through businesses, more than half of the increase.
The income that lifted America's top 1% did not come mainly from tech or Wall Street, according to Owen Zidar and Eric Zwick. More than half of the rise in the top 1% income share since 1985, 5.8 of 10.5 percentage points, flowed through pass-through businesses. Zidar and Zwick, counted roughly 3 million wealthy private business owners, with average net worth near $25 million, running law firms, car dealerships, medical practices, commercial contractors and regional restaurant chains, the kind of businesses that make their owners wealthy and well known in their own communities without ever making them nationally famous.
Takeaways by Macro Roundup® AI
Owen Zidar and Eric Zwick find that 5.8 of the 10.5 percentage-point rise in the U.S. top 1% income share since 1985 flowed through pass-through businesses, more than half of the increase.
Zidar and Zwick count roughly 3 million wealthy private business owners with average net worth near $25 million, running law firms, car dealerships, medical practices, commercial contractors and regional restaurant chains.
The income that lifted America’s top 1% did not come mainly from tech or Wall Street, according to Zidar and Zwick, but from businesses whose owners are well known locally without becoming nationally famous.
Related Articles:
What’s Missing in the Fed’s Data about Ultrarich Portfolios— The Federal Reserve's Distribution of Financial Accounts defines "private business" narrowly as proprietor's equity in noncorporate, nonfinancial businesses, excluding S-corporations, other private corporations, and private equity and hedge fund partnerships, which are lumped into "corporate equities." The Survey of Consumer Finances instead shows private business is roughly 45–50% of top 0.1% wealth.
They’re Rich but Not Famous—and They’re Suddenly Everywhere— An analysis of Federal Reserve data estimates about 430,000 U.S. households are worth $30m or more, including roughly 74,000 worth at least $100m, with growth in the number of very rich households outpacing overall population growth over recent decades. Nearly 72% of the top 0.1%'s wealth consists of corporate equities, mutual fund shares, and private businesses.
Capitalists in the Twenty-First Century— Most income at the top of the US distribution is non-wage income, primarily profits from closely-held, mid-market firms in skill-intensive industries owned by working-age individuals. The authors find private business profit falls by three-quarters after an owner retires or dies prematurely, indicating most top earners are "working rich" deriving income from human capital.
AI Summary.Census data show the number of U.S. families with inflation-adjusted incomes above $150,000 grew from under 3m in 1967 to over 31m in 2025, while families earning under $75,000 fell by almost 3m in absolute terms. The share of families with multiple earners has not increased much over that period.
Jeremy HorpedahlEconomist Writing Every Day
Date Posted:
Is Database:
Database
Is Important:
Important
In 1967, just 5.5% of American families had an inflation adjusted income of $150,000 or more. In 2025, 35.7% did. During that timeframe, the share of families with a real income less than $75,000 declined from 63.4% to 32.8%.
Are more American families reaching higher inflation-adjusted income levels?
Core argument: The number of U.S. families with incomes above $150,000 in 2025 inflation-adjusted dollars rose from fewer than 3 million in 1967 to over 31 million in 2025, according to Census data.
In 1967 there were fewer than 3 million families with incomes over $150,000 (in 2025 inflation-adjusted dollars). By 2025, that had grown to over 31 million families. If we look at the highest income threshold in this Census data — over $200,000 — the number of families has grown from just 1 million in 1967 to over 20 million in 2025. And there are fewer lower-income families too: the number of families under $75,000 shrunk, not just as a proportion of the total but even in absolute terms by almost 3 million families from 1967 to 2025. Of course, some of these families do have more earners than in 1967, though we shouldn’t overstate that too much. Using other data from Census, we can see that the share of families with multiple earners hasn’t increased much since 1967, and especially hasn’t since the mid-1990s.
Takeaways by Macro Roundup® AI
The number of U.S. families with incomes above $150,000 in 2025 inflation-adjusted dollars rose from fewer than 3 million in 1967 to over 31 million in 2025, according to Census data.
Families earning over $200,000, the highest income threshold in the Census data, grew from about 1 million in 1967 to over 20 million in 2025.
Families with incomes under $75,000 declined by almost 3 million in absolute terms from 1967 to 2025, while Census data show the share of families with multiple earners has not increased much since 1967, and especially not since the mid-1990s.
Related Articles:
Income in the United States: 2025— Median U.S. household income rose 2.6% to $87,460, the highest level on record in data going back to 1967. Median income increased 3% for White households, 2.9% for non-Hispanic White households, and 4.8% for Black households, while changes for Asian and Hispanic households were not statistically significant.
The Middle Class Is Shrinking Because of a Booming Upper-Middle Class— Analyses showing a shrinking middle class typically use relative income thresholds that rise with median income, so they can register decline even when living standards rise across the distribution. Using an absolute definition, the authors find the core middle class shrank because the upper-middle class grew from 10% of families to 31%, doubling its income share.
Who Sees Themselves as Working Class?— Survey data indicate 60% of U.S. adults say the term "working class" describes them well, including half of those with a bachelor's degree and half of upper-income Americans. Identification is highest among blue-collar workers at 77%, versus 61% in other occupations, and ranges from 52% of Asian adults to 62% of White adults.
AI Summary.Median U.S. household income rose 2.6% to $87,460, the highest level on record in data going back to 1967. Median income increased 3% for White households, 2.9% for non-Hispanic White households, and 4.8% for Black households, while changes for Asian and Hispanic households were not statistically significant.
Melissa Kollar and Zach SchererU.S. Census Bureau
Date Posted:
Is Database:
Database
Is Important:
Important
Real US median household income increased 2.6% year over year in 2025 to a record high of $87,460.
Has median U.S. household income reached its highest level on record?
Core argument: Median U.S. household income reached $87,460 in 2025, up 2.6% from $85,210 in 2024 and the highest on record in data dating back to 1967.
In 2025, median household income was $87,460, an increase of 2.6% from the 2024 estimate of $85,210. Household income in 2025 was the highest on record dating back to 1967. For all demographic characteristics of the householder the median household income estimates in 2025 were either higher than the 2024 estimates or were not statistically different from 2024. Median household income increased by 3% for White households, 2.9% for non-Hispanic White households, and 4.8% for Black households. Median income did not change significantly for Asian or Hispanic households.
Takeaways by Macro Roundup® AI
Median U.S. household income reached $87,460 in 2025, up 2.6% from $85,210 in 2024 and the highest on record in data dating back to 1967.
Median household income rose 4.8% for Black households, 3% for White households, and 2.9% for non-Hispanic White households in 2025, while Asian and Hispanic households saw no statistically significant change.
Across all demographic characteristics of the householder, 2025 median household income estimates were either higher than or not statistically different from 2024 estimates.
Related Articles:
Income in the United States: 2024— U.S. median household income was $83,730, not statistically different from the prior year's $82,690, according to Census Bureau estimates. Across most demographic subgroups, median household income was higher or not statistically different from the prior year, with the exception of Black households, which saw a decline.
US Focus: The Effect Of Soaring Profits— US nominal pre-tax corporate profits in the national accounts grew 23% over the past year, a pace not seen outside post-recession spikes since the mid-2000s. Wider margins were the key driver, as domestic profit growth far exceeded the 8% rise in corporate value added, pushing margins near all-time highs while the labor share hit new lows.
The College Wage Premium in the Generative AI Era— The U.S. college wage premium fell from 0.626 to 0.575 after four decades of expansion, implying the first sustained negative growth in relative demand for college-educated labor. The authors estimate that weaker wage growth in occupations highly exposed to artificial intelligence accounts for roughly 28% of that decline, though the patterns are not causal.
AI Summary.The average American worker earns enough to buy 10,215 Big Macs a year, the most of any country, followed by Switzerland and Australia. On an hourly basis, Switzerland leads at seven Big Macs per hour, ahead of America's six and Australia's five, reflecting longer American working hours.
Economist StaffThe Economist
Date Posted:
Is Database:
Database
Is Important:
Important
The Economist’s venerable Big Mac Index is indicative of significantly higher after-tax, PPP-adjusted wages for American workers than for their French and German counterparts.
Which country's workers can buy the most Big Macs?
Core argument: The average American worker earns enough to buy 10,215 Big Macs a year, topping the McWages rankings, with Switzerland second and Australia third.
On an annual basis, America continues to top our McWages rankings. The average American worker earns enough to buy 10,215 Big Macs a year; Switzerland and Australia are in second and third place, respectively. But American working hours are supersized, too. On an hourly basis, Switzerland comes out on top: the average worker there earns the equivalent of seven Big Macs an hour, compared with America’s six. Australia ranks third, at five burgers for every hour worked.
Takeaways by Macro Roundup® AI
The average American worker earns enough to buy 10,215 Big Macs a year, topping the McWages rankings, with Switzerland second and Australia third.
On an hourly basis Switzerland leads, with the average worker earning the equivalent of seven Big Macs an hour, compared with six in the United States and five in Australia.
American working hours are longer, which shifts the United States from first place on annual McWages to second on an hourly basis.
Related Articles:
The Big Mac Index At 40— The Big Mac index, which compares burger prices across countries converted into dollars, shows currency misalignments in either direction at their widest since the mid-1990s, with American inflation, an undervalued Chinese yuan, and a falling yen cited as contributors. Big Mac prices also reflect domestic supply and demand for nontradeable goods.
Why Do Americans No Longer Work So Much More Than Non-Americans?— About half of the 1990s gap between American and European hours worked had reversed by the end of the 2010s. The authors estimate US hours per person declined after the 2000s because of rising benefits for the non-employed—especially health benefits like Medicaid—while non-US hours rose with higher wages and lower work costs.
Ed Conard Debates Furman On “The Expected Value of Risk Taking”— A debate on U.S. fiscal policy argues that spending increases, rather than the tax increases needed to fund them, slow growth, and that higher taxes would reduce the expected value of America's innovative risk-taking. The argument holds that cutting debt below 100% of GDP is critical.
AI Summary.In a guaranteed income experiment, the gap between participant income and total household income fell by roughly $1,700 per year, which the authors attribute to lower earnings among other household members. Net transfers to extended family rose by about $135 per year, while measures of household stability, decision-making, and division of labor clustered near zero.
Elizabeth Rhodes, David Broockman, Eva Vivalt, Patrick Krause, et al.National Bureau of Economic Research
Date Posted:
Is Database:
Database
Is Important:
Important
In a randomized guaranteed-income experiment, giving one adult a transfer of $1,000/month for two years cut the other household members’ income by ~$1,700/year. Partners worked less and advanced less at work, while schooling and training among others rose.
How does guaranteed income affect other household members' earnings?
Core argument: In the guaranteed income experiment, the gap between participant income and total household income fell by about $1,700 per year (s.e. $800), a decline that appears to reflect lower earnings among other household members.
Figure 4 summarizes treatment effects on the standardized family-level indices. The transfers’ effects reshaped the income and employment of other household members. The gap between participant income and total household income fell by about $1,700 per year (s.e. $800). The decline appears to reflect lower earnings among other household members. Effects on employment outcomes are consistent with this interpretation. Partner promotions and transitions to better jobs decrease significantly, but these effects are very small in magnitude. Partner hours and employment show more meaningful declines but are not significant in the unconditional analysis. Several other measures provide supporting evidence of negative effects on labor supply. Net transfers—the value given [to extended family] minus the value received—increased by roughly $135 per year. Estimates for household stability, decision-making, and the division of labor cluster near zero.
Takeaways by Macro Roundup® AI
In the guaranteed income experiment, the gap between participant income and total household income fell by about $1,700 per year (s.e. $800), a decline that appears to reflect lower earnings among other household members.
Partner promotions and transitions to better jobs decreased significantly but were very small in magnitude, while partner hours and employment showed more meaningful declines that were not significant in the unconditional analysis.
Net transfers to extended family—value given minus value received—rose by roughly $135 per year, while estimates for household stability, decision-making, and the division of labor cluster near zero.
Related Articles:
The Impact of Unconditional Cash Transfers on Parenting and Children— In a randomized trial, parents receiving $1,000 per month in unconditional cash for three years spent more on their children monthly and reported better parenting behaviors, such as closer supervision, than parents receiving $50 per month. The transfer had no meaningful effect on most educational outcomes, the home environment, child food security, homelessness, or parental satisfaction.
The Employment Effects of a Guaranteed Income: Experimental Evidence from Two U.S. States— In a randomized experiment, 1,000 low-income individuals received $1,000/month unconditionally for three years while a control group of 2,000 received $50/month, and the transfers reduced individual income excluding transfers by about $1,500/year. The authors find no significant effects on human capital investment and conclude the transfers produced a moderate labor supply reduction not offset by other productive activities.
AI Summary.The authors find cognitive ability test scores predict capital income, with the gradient in log capital income about 3x steeper than for labor income, and only partly explained by labor earnings. Higher-ability individuals are associated with higher saving rates and higher risk-adjusted returns while holding portfolios with lower systematic risk.
Spencer Bastani, Kristina Karlsson, Jonas Kolsrud and Daniel WaldenströmUppsala University
Date Posted:
Is Database:
Database
Is Important:
Important
Cognitive ability positively predicts capital as well as labor income, with the capital-income gradient ~3x as large in % terms. This reflects both higher saving rates and higher risk-adjusted returns, neither fully explicable by earnings.
Does cognitive ability predict capital income more strongly than labor income?
Core argument: Cognitive ability, measured on a 1–9 test-score scale, predicts capital income, with a log-income gradient roughly three times steeper than the labor income gradient; in rank terms the labor gradient is steeper, because capital income's heavy right tail compresses rank differences.
We document three results. First, cognitive ability predicts capital income. Figure 2 plots mean log income and mean income rank against the nine cognitive ability scores reporting test performance on a 1–9 scale, with both series normalized to zero at the lowest score. In the log specification (Panel a), the capital income gradient is roughly three times steeper than the labor income gradient. In the rank specification (Panel b), the ordering reverses: the labor income gradient is steeper, because the heavy right tail of capital income compresses rank differences. Figure 3 provides a complementary perspective, plotting average cognitive ability across percentiles of the labor and capital income distributions. [The relationship between ability and rank flattens at the top of the labor distribution but strengthens at the top of the capital distribution.] Second, the capital-income gradient is only partially explained by labor income: a decomposition shows that ability is associated with higher saving rates and investment returns through channels beyond labor income. Third, the investment return channel is consistent with skill rather than risk compensation, as high-ability individuals earn higher risk-adjusted excess returns while holding portfolios with lower systematic risk.
Takeaways by Macro Roundup® AI
Cognitive ability, measured on a 1–9 test-score scale, predicts capital income, with a log-income gradient roughly three times steeper than the labor income gradient; in rank terms the labor gradient is steeper, because capital income's heavy right tail compresses rank differences.
The capital-income gradient is only partially explained by labor income: a decomposition shows cognitive ability is associated with higher saving rates and higher investment returns through channels beyond labor income.
High-ability individuals earn higher risk-adjusted excess returns while holding portfolios with lower systematic risk, a pattern consistent with skill rather than risk compensation.
Related Articles:
Cognitive Skills Beyond Childhood— Wages at age 50 rise more steeply with cognitive skills measured at age 16 than with cognitive skills measured at age 50; for women, moving from average to two standard deviations above average raises expected hourly wages from £11 to £22 using age-16 skills, versus £12 to £15 using age-50 skills.
Steeper At The Top: Cognitive Ability and Earnings in Finland and Norway— Administrative data on over 350,000 men each in Finland and Norway show a convex relationship between earnings rank and cognitive ability measured by military conscription tests: top-percentile earners score about 1 standard deviation above median earners, who score about 0.5 above bottom-percentile earners. The lowest scores are almost absent among top earners.
Toward An Understanding Of The Returns To Cognitive Skills Across Cohorts— The authors find that the estimated decline in labor market returns to pre-labor-market cognitive skills for white men across two U.S. youth cohorts depends critically on the widening and increased left-skewness of the test-score distribution, with declines appearing only at the lower end of that distribution.
AI Summary.The measured corporate labor share fell from 63% in 1978 to 58% in 2017, but the authors estimate that tax-driven reclassification of wages as S corporation profit and the shift of high-labor-share firms into partnerships account for about 1.6 percentage points, roughly a third of the decline.
Owen Zidar And Eric ZwickThe Everywhere Millionaire
Date Posted:
Is Database:
Database
Is Important:
Important
A third of the 9pp drop in labor’s share of corporate income btw 2000 and 2025 is due to tax policy changes that incentivized business migration to partnerships, relabeling some earnings of the top 1% as pass-through income, lowering reported wages.
Does tax-driven business reclassification explain part of the falling labor share?
Core argument: The corporate-sector labor share fell from 63% in 1978 and about 64% in 2000 to 58% in 2017 and 55% in 2025, a headline decline of 5 percentage points from 1978 to 2017.
The corporate-sector labor share was 63% in 1978, fluctuated modestly through the 1980s and 1990s, and still stood near 64% in 2000. Then it fell to 58% in 2017 and 55% in 2025. Change of label pulls down the measured labor share because the national accounts count S corporation profit as capital income. When we add these recharacterized wages back into the labor income bucket, then the corporate labor share in 2017 is about 0.9 percentage points higher. In addition, many firms have left the corporate sector and reorganized as partnerships. Partnership profit has grown from 13% of all business profit in 1980 to 35% today. These partnerships have labor shares more than 10 percentage points higher than the corporate firms left behind. As these high-labor-share businesses left, the corporate sector that remained looked more capital-heavy than it used to. When we treat the partnership activity that migrated out since 1986 as if it had stayed in corporate form, the 2017 labor share is another 0.7 percentage points higher. These two corrections together are worth about 1.6 percentage points. The headline decline from 1978 to 2017 was 5 points. Our adjusted decline is 3.4. Thus, the tax code accounts for roughly a third of the decline.
Takeaways by Macro Roundup® AI
The corporate-sector labor share fell from 63% in 1978 and about 64% in 2000 to 58% in 2017 and 55% in 2025, a headline decline of 5 percentage points from 1978 to 2017.
Adding back S corporation profit that reflects recharacterized wages raises the 2017 corporate labor share by about 0.9 percentage points, since the national accounts count such profit as capital income.
Partnership profit rose from 13% of all business profit in 1980 to 35% today, and treating partnership activity that migrated out since 1986 as corporate adds another 0.7 percentage points, leaving an adjusted 1978–2017 decline of 3.4 points.
Related Articles:
What’s Missing in the Fed’s Data about Ultrarich Portfolios— The Federal Reserve's Distribution of Financial Accounts defines "private business" narrowly as proprietor's equity in noncorporate, nonfinancial businesses, excluding S-corporations, other private corporations, and private equity and hedge fund partnerships, which are lumped into "corporate equities." The Survey of Consumer Finances instead shows private business is roughly 45–50% of top 0.1% wealth.
The Rise of Pass-Throughs and the Decline of the Labor Share— The authors estimate that reallocating business activity to its pre-1986 organizational form accounts for one-third of the decline in the corporate sector labor share, which fell from 62.9% to 57.9% between 1978 and 2017. US tax reform encouraged firms to organize as pass-through entities, letting income be characterized as profits rather than labor payments.
Capitalists in the Twenty-First Century— Most income at the top of the US distribution is non-wage income, primarily profits from closely-held, mid-market firms in skill-intensive industries owned by working-age individuals. The authors find private business profit falls by three-quarters after an owner retires or dies prematurely, indicating most top earners are "working rich" deriving income from human capital.
AI Summary.A young K-12 teacher in New York City earns $62,000 versus $37,000 in Jackson, Mississippi, where teacher pay is the nation's lowest. After adjusting for housing, commuting, taxes, and other cost-of-living differences, the New York City teacher is worse off, suggesting salaries are not a source of savings.
Aziz SunderjiHome Economics
Date Posted:
Is Database:
Database
Is Important:
Important
A young teacher in NYC earns $62,000 dollars, compared to the $37,000 earned by a peer teacher in Jackson, Mississippi. Aziz Sunderji finds that “after housing, commute, taxes, and other cost-of-living differences, the NYC teacher is actually worse off.”
Do higher big-city teacher salaries leave teachers better off after costs?
Core argument: A young K-12 teacher in New York City, the country's most expensive school district, earns $62,000, versus $37,000 for a comparable teacher in Jackson, Mississippi, where teacher pay is the nation's lowest.
A young K-12 teacher in New York City—the most expensive school district in the country—earns $62,000. A comparable teacher in Jackson, Mississippi, where teacher pay is the nation’s lowest, earns $37,000. Could salaries be a source of savings, helping to bring school costs here closer to the national average? The chart suggests not: after housing, commute, taxes, and other cost-of-living differences, the NYC teacher is actually worse off.
Takeaways by Macro Roundup® AI
A young K-12 teacher in New York City, the country's most expensive school district, earns $62,000, versus $37,000 for a comparable teacher in Jackson, Mississippi, where teacher pay is the nation's lowest.
After housing, commute, taxes, and other cost-of-living differences, the New York City teacher is worse off than the Jackson, Mississippi teacher despite the $25,000 higher salary.
Teacher salaries appear unlikely to be a source of savings for bringing New York City school costs closer to the national average.
Related Articles:
Where is Standard of Living the Highest? Local Prices and the Geography of Consumption— The authors estimate that geographical differences in cost of living are especially large for low-income US households, and that expensive cities offer college graduates a standard of living similar to affordable cities while offering less-educated households a lower one. A high school dropout household moving from the most affordable to the most expensive commuting zone would see consumption fall 18.5%.
Housing and the American Worker— Wages net of housing costs were once substantially higher in high-density areas than low-density areas for workers both with and without college education, but over the past half-century that urban wage premium has persisted only for college-educated workers, not for those with a high school degree or less.
The Determinants Of Declining Internal Migration— A 10% increase in wages where people live is associated with 3.5% less migration, while a 10% increase in destination wages is associated with 7.8% more migration; a 10% rise in destination home prices is associated with 2.6% less migration. The authors find wage responses alone would have raised migration rates, but housing-related factors more than offset them.
