US Inequality 25aug17

Deutsche Bank
Markets Research
US Inequality
August 2017 Peter Hooper, Matthew Luzzetti, Brett Ryan, and Torsten Slok
60 Wall Street
New York, New York 10005
Tel: 212 250 7275
DISCLOSURES AND ANALYST CERTIFICATIONS ARE LOCATED IN APPENDIX 1 MCI(P) 083/04/2107.

Overview
Inequality is likely an important driver of populism.
It is important for markets to understand the drivers

of inequality and how income and wealth inequality
have developed in different countries.
The bottom line is that inequality is increasing in

most countries around the world and there are no
signs of this changing anytime soon.
Deutsche Bank Deutsche Bank 1

Markets Research Torsten Slok, torsten.slok@db.com +1 212 250-2155
Drivers of income inequality
Inequality Drivers
Technological Trade Financial labor market

Tax policies Education
change globalization globalization institutions
Technological change Trade openness raises FDI and portfolio flows More flexible labor Governments in
disproportionately raise skill premium, but also increase income market institutions advanced Effect of increased
demand for capital and increases real wages inequality through can pose economies have educational
skilled labor over low- by lowering import concentration of challenges for historically mitigated attainment on
skilled and unskilled prices. While foreign assets and workers, especially inequality through income inequality
labor by eliminating increased trade lower liabilities in relatively those with low public policy— could be either
many jobs through income inequality in higher skill- and skills, and hence primarily positive or negative
automation or EMEs by increasing technology-intensive play an important progressive taxes depending on the
upgrading the skill demand and wages for sectors, pushing up explaining role in and social transfers evolution of rates of
level required to attain abundant lower-skilled demand for wages of inequality such as public return to education.
or keep those jobs workers. higher skilled workers. developments retirement benefits.
Source: OECD , DB Global Markets Research

Country groups with similar patterns of inequality
Low inequality in household Higher inequality in household

disposable income disposable income
Austria
Belgium
Germany
Czech Republic Australia Chile
Denmark Greece
Estonia Canada Israel
Iceland Hungary
Finland Ireland Mexico
Norway Japan
France Netherlands Portugal
Sweden Korea
Italy New Zealand Turkey
Switzerland Luxembourg
Slovak Republic United Kingdom United States
Poland
Slovenia
Spain
Average dispersion in labor

income (little wage variation Individual labor income is
Low dispersion in labor
but low employment or high concentrated, reflecting above Above average wage
income (high employment rate High concentration of labor,
part-time rate). Highly average dispersion in wages dispersion coupled with a high
and little wage dispersion). capital and self-employment
concentrated capital and self- and a low employment or high part-time rate. Cash transfers
Cash transfers tend to be income. The poverty rate is
employment income. Cash part-time rate. Taxes and are targeted and taxes are
universal and taxes are not high.
transfers (largely insurance- transfers are not highly progressive.
highly progressive.
based) and taxes are not progressive.
highly progressive

Income inequality very high in the United States
Gini cocefficient
US: high inequality
0.40 0.40
0.35 0.35
More equal societies

0.30 0.30
0.25 0.25
0.20 0.20
Slovenia
Latvia
Slovak Republic
Iceland
Ireland
Japan
New Zealand
Israel
Italy
Turkey
OECD
Austria
Finland
Sweden
France
Estonia
Luxembourg
Switzerland
Poland
Korea
Canada
Australia
Greece
Spain
Portugal
Belgium
UK
US
Norway
Denmark
Czech Republic
Netherlands
Hungary
Germany
Note: Gini coefficients (disposable income, post taxes and transfers) are based on equivalised incomes for OECD countries, Colombia, Latvia and the Russian Federation; per-
capita incomes for other countries; and per-capita consumption for India and Indonesia. Data from 2014 or latest year available.

Income inequality increasing everywhere
Gini coefficients of income inequality,
mid-1980s and 2014 or latest available year
0.50 0.50
1985 2014 or latest
0.45 0.45
0.40 0.40
0.35 0.35
0.30 0.30
0.25 0.25
0.20 0.20
0.15 0.15
N
K
N
R
ZL
EU
AN
X
N
R
S
SA
A
E
BR
ZE
N
LU
JP
AU
O
FI
SW
IT
IS
N
D
U
G
N
Note: Note: Income refers to disposable household income, corrected for household size.

Across OECD countries incomes have
increased more for high-income households
Trends in real household incomes at the bottom, the
middle and the top, OECD average, 1985 = 1
Bottom 10% Bottom 40%
1.60 Top 10% middle 50-90% 1.60
1.50 1.50
1.40 1.40
1.30 1.30
1.20 1.20
1.10 1.10
1.00 1.00
1985 1990 1995 2000 2005 2010
Note: Note: Income refers to disposable household income, corrected for household size. OECD is the unweighted average of 17 countries (Canada, Germany, Denmark,
Finland, France, United Kingdom, Greece, Israel, Italy, Japan, Luxembourg, Mexico, Netherlands, Norway, New Zealand, Sweden and United States).
US Income inequality
today and over time

The 2.3 million people in the top 1% of the income
distribution earn on average $1.3mn per year
$mn Average pre-tax income in the U.S. in 2014 $mn

Number of adults in each income category
234mn 117mn 94mn 23mn 2.3mn 234k
8 8
7 7
$6.0mn
6 Bottom 50% of the 6
income distribution
5 (117mn adults) 5
earn on average
4 $16k pear year 4
3 3
2 $1.3mn 2
1 $304k
1
$65k $16k $65k
0 0
population
Middle
Top 10%
Top 1%
Top 0.1%
Bottom
40%
50%
Full
Source: Pikketty, Saez, and Zucman (2016, Table 1), DB Global Markets Research

US: The top 10 percent of families own $51trn in
wealth, or about 75% of total household wealth
Holdings of family wealth, by wealth group
Bottom 50 percent 51st to 90th percentiles Top 10 percent
75 75
60 60
Trillion of 2013 $
Trillion of 2013 $
45 45
30 30
15 15
0 0
1989 1992 1995 1998 2001 2004 2007 2010 2013
Source: Congressional Budget Office, using data from the Survey of Consumer Finances, supplemented with data from Forbes magazine's list of the nation's 400
wealthiest people, DB Global Markets Research

Income share up significantly for highest incomes
Top 10% Pre-tax Income Share in the United States, 1917–2015

55 55
50 50
45 45
40 40
35 35
30 30
25 25
1913 1923 1933 1943 1953 1963 1973 1983 1993 2003 2013
Note: Series based on pre-tax cash market income including realized capital gains and excluding government transfers.
Source: Alvaredo et al. (2016)., DB Global Markets Research
Top 1% earn 22% of total income,
up from 8% in the 1970s
Decomposing the U.S. Top 10%
Pre-tax Income into Three Groups
% %
Share of total income accruing to each group
Top 1% (incomes above $443,000 in 2015)
25 Top 10-5% (incomes between $124,800 and $180,500) 25
Top 5-1% (incomes between $180,500 and $443,000)
20 20
15 15
10 10
5 5
0 0
1913
1918
1923
1928
1933
1938
1943
1948
1953
1958
1963
1968
1973
1978
1983
1988
1993
1998
2003
2008
2013
Note: Series based on pre-tax cash market income including realized capital gains and excluding government transfers.
Source: Atkinson, Piketty and Saez. (2015)., DB Global Markets Research

Wage inequality a key driver of income inequality
% %
Share of top income decile in total income
Share of top inocme decile in total income excluding capital gains
50 Share of top wage decile in total wage bill 50
45 45
40 40
35 35
30 30
25 25
20 20
40 45 50 55 60 65 70 75 80 85 90 95 00 05 10
Source: Piketty (2014)., DB Global Markets Research
Business income and capital gains make
up bigger share of income for the Top 0.1%
U.S. Top 0.1% Pre-Tax Income Share and Composition
14% Salaries Business Income Capital Income Capital Gains 14%
12% 12%
10% 10%
8% 8%
6% 6%
4% 4%
2% 2%
0% 0%
16
21
26
31
36
41
46
51
56
61
66
71
76
81
86
91
96
01
06
11
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
20
20
20
Note: Series based on pre-tax cash market income including or excluding realized capital gains, and always excluding
government transfers.
Incomes have stagnated for lower income
groups, increased for higher income groups
Real family income between 1967 and 2015, as % of 1973 level
% %
10th percentile limit 20th percentile limit 40th percentile limit
180 50th (median) 60th percentile limit 80th percentile limit 180
90th percentile limit 95th percentile limit
160 160
140 140
120 120
100 100
80 80
60 60
40 40
20 20
0 0
1967 1972 1977 1982 1987 1992 1997 2002 2007 2012
Source: US Census, DB Global Markets Research
Higher income growth at
the top of the income distribution
% Cumulative Growth in Average Inflation-Adjusted After- %
350 Tax Income, by Before-Tax Income Group, 1979 to 2013 350
Lowest Quintile
300 Middle Three Quintiles 300
250 81st to 99th Percentiles 250

Top 1 Percent
200 200
150 150
100 100
50 50
0 0
-50 -50
1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012
Source: CBO, DB Global Markets Research
Income inequality up no matter
how you measure the Gini coefficient
Gini Indexes Based on Market, Before-Tax, and After-Tax
Income, 1979 to 2013
Based on After-Tax Income Based on Before-Tax Income Based on Market Income
0.70 0.70
0.60 0.60
0.50 0.50
0.40 0.40
0.30 0.30
0.20 0.20
0.10 0.10
0.00 0.00
1980 1985 1990 1995 2000 2005 2010
Source: CBO, DB Global Markets Research
Income concentration at the
top has increased since the 1970s
Share of total before tax income flowing to the highest
income households in United States, 1913-2015
55% 55%
Top 1 percent Top 10 percent
50% 50%
45% 45%
40% 40%
35% 35%
30% 30%
25% 25%
20% 20%
15% 15%
10% 10%
5% 5%
0% 0%
1913 1923 1933 1943 1953 1963 1973 1983 1993 2003 2013
Source: World Wealth and Income database , DB Global Markets Research
Declining labor share is negatively
related to higher inequality
United States : labor share vs Gini ratio
1967-2015
0.50
0.48
Gini Ratio for Households
0.46
0.44
y = -0.014x + 1.2814
0.42
R2 = 0.6865
0.40
0.38
0.36
56 57 58 59 60 61 62 63 64
Total Economy: Labor Share (%)
Source: Census, BLS, Haver Analytics, DB Global Markets Research

Tax cuts have increased inequality
% Growth rate of federal tax receipts (10 yr MA) %

Share of top 1% (4 yr lead)
25 Bush tax cuts

25
Correlation = -0.63 Reagan tax cuts
20 20
15 15
10 10
5 5
0 0
60 65 70 75 80 85 90 95 00 05 10 15
Source: BLS, FRED, Piketty 2014 database, DB Global Markets Research
Different income growth under different political parties
% Democrats Republicans
2
Average annual growth in real income
1.5
0.5
-0.5
-1
0 10 20 30 40 50 60 70 80 90 100
Income quintile
Source: Unequal democracy by Larry Bartels, DB Global Markets Research

0
10
20
30
40
50
60
70
80
%
$1 to $2,499 or less
$2,500 to $4,999
Deutsche Bank
$5,000 to $7,499
Markets Research
$7,500 to $9,999
$10,000 to $12,499
$12,500 to $14,999
$15,000 to $17,499
$17,500 to $19,999
$20,000 to $22,499
$22,500 to $24,999
$25,000 to $27,499
$27,500 to $29,999
$30,000 to $32,499
$32,500 to $34,999
Deutsche Bank
$35,000 to $37,499
$37,500 to $39,999
$40,000 to $42,499
$42,500 to $44,999
$45,000 to $47,499
$47,500 to $49,999
$50,000 to $52,499
% with Bachelor's Degree or more
$52,500 to $54,999
$55,000 to $57,499
Torsten Slok, torsten.slok@db.com +1 212 250-2155

$57,500 to $59,999
$60,000 to $62,499
$62,500 to $64,999
$65,000 to $67,499
Total money earnings in 2015 $67,500 to $69,999
$70,000 to $72,499
Source: Census, DB Global Markets Research $72,500 to $74,999
in 2015 by educational attainment
the higher are your earnings
$75,000 to $77,499
The more education you have
Total money earnings of US population
$77,500 to $79,999
$80,000 to $82,499
$82,500 to $84,999
$85,000 to $87,499
$87,500 to $89,999
$90,000 to $92,499
$92,500 to $94,999
% with High school and less
$95,000 to $97,499
$97,500 to $99,999
$100,000 and over
%
21
10
20
30
40
50
60
70
80
Disconnect between productivity and wage growth since
1970s contributed to higher inequality in the U.S
Index 1947=100 Productivity growth vs wage growth Ratio
500 0.460
Real Output per Hour of All Persons(ls)
450 Real Compensation per Hour(ls)
Gini ratio (rs) 0.440
400
0.420
350
300 0.400
250
0.380
200
0.360
150
100 0.340
47 52 57 62 67 72 77 82 87 92 97 02 07 12
Source: BLS, Census, Haver Analytics, DB Global Markets Research
Percentage of population receiving food stamps, 2016
0-10%
10-20%
20-30%
Source: CBPP, DB Global Markets Research

Spending on luxuries and necessities by income
Nominal consumption shares in total expenditure by income quintile
Highest Fourth
% Luxuries Necessities % % Luxuries Necessities %
70 70 70 70
60 60 60 60
50 50 50 50
40 40 40 40
30 30 30 30
84 89 94 99 04 09 14 84 89 94 99 04 09 14
% % % Lowest %
Third % Second %
70 70 70 Luxuries Necessities 70
Luxuries Necessities Luxuries Necessities
70 70
60 60 60 60
60 60
50 50 50 50
50 50
40 40 40 40 40 40
30 30 30 30 30 30
84 89 94 99 04 09 14 84 89 94 99 04 09 14
84 89 94 99 04 09 14
Luxuries are defined as goods or services consumed in greater proportions as a person’s income increases. Specifically luxuries are: Food away from home, Owned dwellings, Household
furnishings, equipment, Vehicles, Cash contributions, Entertainment, Personal insurance, pensions, Other vehicle expenses, Public transportation, and Other lodging.
Necessities are defined as goods or services whose consumption is proportionately less as a person’s income increases. Specifically, necessities are: Food at home, Rented dwellings,
Utilities, fuels, public services, Healthcare, Education, Personal care, Tobacco, smoking products, Gas and motor oil, Housekeeping supplies, Alcoholic beverages, Reading, and Apparel
and services.
Source: Consumer Expenditure Survey BLS, Haver Analytics, DB Global Markets Research

US wealth inequality
today and over time

Wealth inequality has also increased
Top 0.1% (above $20 million) Wealth

Share in the United States, 1913–2012
25% 25%
20% 20%
15% 15%
10% 10%
5% 5%
0% 0%
1913
1918
1923
1928
1933
1938
1943
1948
1953
1958
1963
1968
1973
1978
1983
1988
1993
1998
2003
2008
2013
Share of wealth owned by the bottom 90% has gone down
Bottom 90% Wealth Share in the United States, 1917–2012
40% 40%
35% 35%
30% 30%
25% 25%
20% 20%
15% 15%
10% 10%
5% 5%
0% 0%
1913
1918
1923
1928
1933
1938
1943
1948
1953
1958
1963
1968
1973
1978
1983
1988
1993
1998
2003
2008
2013
Composition of wealth for the bottom 90%
Composition of the Bottom 90% U.S. Wealth Share

40% Housing Equites & fixed income claims 40%
35% Business assets Pensions 35%
30% 30%
25% 25%
20% 20%
15% 15%
10% 10%
5% 5%
0% 0%
1917
1922
1927
1932
1937
1942
1947
1952
1957
1962
1967
1972
1977
1982
1987
1992
1997
2002
2007
2012
Average wealth for the Top 1% and the Bottom 90%
Real average wealth of bottom 90% and top 1% families

16,000,000 Top 1% (ls) Bottom 90% (rs) 160,000
Bottom 90% real average wealth

14,000,000 140,000
Top 1% real average welath
12,000,000 120,000
10,000,000 100,000
8,000,000 80,000
6,000,000 60,000
4,000,000 40,000
2,000,000 20,000
0 0
1946
1950
1954
1958
1962
1966
1970
1974
1978
1982
1986
1990
1994
1998
2002
2006
2010
Real values are obtained by using the GDP deflator, 2010 dollars.
Source: Saez and Zucman (2016).)., DB Global Markets Research
Types of assets held across wealth distribution
% Percent of total assets held by wealth Class, 2013 %

Bottom 90% Next 9% Top 1%
100 100
80 80
60 60
40 40
20 20
0 0
insurance
mutual funds
Non-home
accounts
real estate
Business
directly or
Total debt
Financial
residence
securities
Trusts
Deposits
Pension
Principal
Stocks,
equity
Stocks &
Life
Households are classified into wealth class according to their net worth. Brackets for 2013 are:
Top one percent: Net worth of $7,766,500 or more.
Next 9 percent: Net worth between $980,900 and $7,766,500.
Bottom 90 Percent: Net worth less than $908,900.
Source: Edward N. Wolff, (2014), Survey of Consumer Finances, DB Global Markets Research
Wealth composition for middle income America
Composition of household wealth of the middle three wealth quintiles,
1983-2013
Miscellaneous assets
Unincorporated business equity
Corporate stock, financial securities, mutual funds, and personal trusts
Pension accounts
Liquid assets
Principal residence
100 100
80 80
60 60
40 40
20 20
0 0
1983 1989 1998 2001 2004 2007 2010 2013
Source: Edward N. Wolff, (2014), Survey of Consumer Finances, DB Global Markets Research
Comparing US
inequality with inequality
in other countries

The rich has gotten richer over time in most countries
Top 1% share of total economy-wide income

% 1980 Change in 1980-90 Change in 1990-00 Change in 2000-Latest
%
25 25
20 20
15 15
10 10
5 5
0 0
-5 -5
-10 -10
US UK Germany France Sweden Japan India Indonesia Sourth China
Africa
Note: Total income is defined as the sum of all income items reported on income tax returns, before any deduction.
Source: WID database, DB Global Markets Research

Incomes of the top 20% increased
while incomes of middle 20% decreased
% Change in income share, 1990-2009 %
4 Middle 20% Top 20% 4
3 3
2 2
1 1
0 0
-1 -1
-2 -2
Advanced Economies Emerging Economies
Comparing inequality in US with France and UK
The top 1% and bottom 90% wealth distribution
% Top 1% % % Bottom 90% %
1980 2012 1980 2012

0.6 0.6 0.6 0.6
0.5
0.4 0.4 0.4 0.4
0.3
0.2 0.2 0.2 0.2
0.1
0 0 0 0
France UK US France UK US

U-shaped development in income
inequality in English speaking countries
Top 1% Income Share: English Speaking Countries (U-shaped)
25% Canada United Kingdom 25%

United States
20% 20%
15% 15%
10% 10%
5% 5%
0% 0%
1913
1918
1923
1928
1933
1938
1943
1948
1953
1958
1963
1968
1973
1978
1983
1988
1993
1998
2003
2008
2013
L-shaped development in income
inequality in Europe and Japan
Top 1% Income Share: Continental Europe and Japan (L-shaped)
30% 30%
France Sweden
Japan
25% 25%
20% 20%
15% 15%
10% 10%
5% 5%
0% 0%
1910
1915
1920
1925
1930
1935
1940
1945
1950
1955
1960
1965
1970
1975
1980
1985
1990
1995
2000
2005
2010
2015
Marginal tax rates down in recent decades
Top income tax rates, 1900-2013
Marginal tax rate applying to the highest incomes
100% U.S. Germany France U.K. 100%

90% 90%
80% 80%
70% 70%
60% 60%
50% 50%
40% 40%
30% 30%
20% 20%
10% 10%
0% 0%
1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010
The top marginal tax rate of the income tax (applying to the highest incomes) in the U.S. dropped from 70% in 1980 to 28% in 1988.
Source: Piketty (2014). Figure also appears in Piketty and Saez (2014)., DB Global Markets Research
Other taxes affecting the top 1% have also fallen
% Dividend income tax (ls) Corporate income tax (ls) %

Top 1% income share (rs)
80 10.0
70 9.5
60 9.0
50 8.5
40 8.0
30 7.5
20 7.0
10 6.5
0 6.0
1981 2013
Source: OECD Tax Database, OECD Income Database, DB Global Markets Research
Big differences in income
growth across the income distribution
% Trends in real household income by income group, %
mid-1980s to late 2000s, average annual change in percent
5 5
4 Total population Bottom decile Top decile 4
3 3
2 2
1 1
0 0
-1 -1
Czech Republic
New Zealand
Hungary
Netherlands
United Kingdom
Italy
Turkey
Norway
Finland
Ireland
Luxembourg
Belgium
Germany
United States
Chile
Sweden
Israel1
Australia
Portugal
Denmark
Austria
Mexico
Japan
France
Spain
Canada
OECD-27
Greece
Note: Income refers to disposable household income, corrected for household size and deflated by the consumer price index (CPI). Average annual changes are calculated over the
period from 1985 to 2008, with a number of exceptions: 1983 was the earliest year for Austria, Belgium, and Sweden; 1984 for France, Italy, Mexico, Turkey and the United States; 1986
for Finland, Luxembourg, and Norway; 1987 for Ireland; 1988 for Greece; 1991 for Hungary; 1992 for the Czech Republic; 1995 for Australia and Portugal and 1996 for Chile. The latest
year for Chile was 2009; for Denmark, Hungary, and Turkey it was 2007; and for Japan 2006. Changes exclude the years 2000 to 2004 for Austria, Belgium, Ireland, Portugal and Spain
for which surveys were not comparable. Source: OECD, DB Global Markets Research

Product and labour market regulations
and institutions became weaker
Developments in product market regulation, employment protection
legislation, tax wedges and union density, OECD average, 1980-2008
150 (1980 = 100) 150
PMR Tax wedge Union density EPL
125 125
100 100
1985=100
75 1980=100 75
50 50
25 25
0 0
80
82
84
86
88
90
92
94
96
98
00
02
04
06
08
19
19
19
19
19
19
19
19
19
19
20
20
20
20
20
Note: “PMR” is a summary indicator for product market regulation. “EPL” is a summary indicator of the strictness of overall employment protection legislation (only available from 1985
onwards). “Tax wedge” refers to an average worker and is the sum of income tax and employees and employers payroll taxes as a percentage of labour costs. “Union density” is the
number of union members as a proportion of all employees eligible to be members.
Source: OECD, DB Global Markets Research

Hours worked declined more among lower-wage workers
Trends in annual hours worked by the bottom and top 20% of
earners, OECD average, mid-1980s to mid-2000s
Total Bottom quintile Top quintile
-8 -6 -4 -2 0 2 4 6 8
Percentage change in hours worked
Note: Paid workers of working age.

Capital income bigger part of total income
in advanced economies than in the past
% The capital share in rich countries, 1975-2010 %
U.S. Japan Germany France U.K.
Italy Canada Australia
40 40
35
35
30
30
25
25 20
15
20
10
15
5
10 0
75 80 85 90 95 00 05 10
Source: Piketty (2014), DB Global Markets Research

Median net household wealth low in the US
Median net household wealth, 2010 or
$ latest available year values in 2005 USD $
400000 400000
350000 350000
300000 300000
250000
250000
200000
200000
150000
100000 150000
50000 100000
0 50000
Canada
Netherlands
Slovak Republic
Norway
United Kingdom
Finland
Luxembourg
Australia
Germany
United States
Portugal
Austria
France
Spain
Belgium
Korea
Italy
Greece
OECD18
Source: OECD Wealth Distribution Database., DB Global Markets Research

Net household wealth at bottom of wealth distribution
Net household wealth, Bottom quintile

$ $
2010 or latest available year, values in 2005 USD
30 000 30000
20 000 20000
10 000 10000
0
-10 000 -10000
-20 000 -20000
-30 000 -30000
-40 000 -40000
-50 000 Luxembourg -50000
Belgium
Netherlands
Kingdom
Finland
Republic
Australia
Portugal
Germany
Austria
United
Spain
Canada
France
Italy
Norway
Korea
Greece
States
Slovak
United
OECD18

Net household wealth at top of wealth distribution
Net household wealth, Top quintile

$ $
2 500 000 2500000
2 000 000 2000000
1 500 000 1500000
1 000 000 1000000
500 000 500000
Luxembourg
Belgium
Netherlands
Kingdom
Finland
Republic
Australia
Portugal
Germany
Austria
Spain
United
Canada
France
Italy
Norway
Korea
Greece
States
Slovak
United
OECD18

Housing is an important part of wealth
Median net wealth and change in house prices
250 000
AUS ESP
200 000 BEL
GBR
Median net wealth
ITA
CAN
150 000 KOR
GRC
PRT FRA NOR
100 000 SVK
AUT
FIN
50 000 DEU USA NLD
0
-1.5 -1.0 -0.5 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5
Annual growth rate of house prices (%)
Note: The median net wealth is expressed in 2005 USD; changes in house prices are measured by the annual growth rate of house prices over the period 1970-2013 for most countries
(refer to Table 6.2 for corresponding periods).

Peter Hooper
• Managing Director, Chief Economist
• Deutsche Bank Securities, Inc.
• +1 (212) 250-7352
• peter.hooper@db.com
• Peter Hooper is currently Managing Director and Chief Economist for Deutsche Bank
Securities. He joined Deutsche Bank Securities in the fall of 1999, first as Chief
International Economist and shortly thereafter as Chief US Economist. He became Chief
Economist and co-head of global economics in 2006. Prior to joining Deutsche Bank,
Hooper enjoyed a distinguished 26-year career at the Federal Reserve Board in
Washington, D.C. While rising to senior levels of the Fed staff, he held numerous
positions, including as an economist on the FOMC and as Deputy Director of the Division
of International Finance.
• Hooper produces weekly and quarterly publications for Deutsche Bank with a focus on
US and global economic developments and Fed policy; he also comments on US and
global economic and financial developments in the news media. His US Economics team
has been ranked No. 1 in fixed income research by Institutional Investor in 2010 and
2011. Hooper currently serves as a member of the Economic Advisory Panel of the
Federal Reserve Bank of New York, a member and former chairman of the Economic
Advisory Committee of the American Bankers Association, a founding member of the US
Monetary Policy Forum, a member of the Economic Leadership Council for the University
of Michigan, and a member of the Forecasters’ Club of New York.
• Hooper earned a BA in Economics (cum laude) from Princeton University and an MA and
Ph.D. in Economics from University of Michigan. He has published numerous books,
journal articles, and reviews on economics and policy analysis.

Torsten Slok, Ph.D.
• Chief International Economist, Managing Director
 Torsten Slok joined Deutsche Bank Securities in the fall of 2005.

 Mr. Slok’s Economics team has been top-ranked by Institutional Investor for the past
four years. Slok currently serves as a member of the Economic Club of New York
 Prior to joining the firm, Mr. Slok worked at the OECD in Paris in the Money and
Finance Division and the Structural Policy Analysis Division. Before joining the
OECD he worked for four years at the IMF in the Division responsible for writing the
World Economic Outlook and the Division responsible for China, Hong Kong, and
Mongolia.
 Mr. Slok studied at University of Copenhagen and Princeton University. He has
published numerous journal articles and reviews on economics and policy analysis,
including in Journal of International Economics, Journal of International Money and
Finance, and The Econometric Journal.

Brett Ryan
• Director
 Brett Ryan joined Deutsche Bank's US Economics Research team in May

2010. Prior to joining the team, Brett spent five years at Deutsche Bank in the
institutional equity research sales group. Brett has a Bachelor of Arts degree
from the University of Pennsylvania; majoring in politics, philosophy and
economics.

Matthew Luzzetti
(+1) 212 250-6161
matthew.luzzetti@db.com
Matthew Luzzetti joined Deutsche Bank in September 2012 and

is currently a senior economist in DB’s top Institutional Investor-
ranked economics team in New York. He previously held a
position in DB’s Office of the Chief Economist in London.
Matthew’s research focuses primarily on the US economy and
Fed policy, where he regularly contributes to DB’s Global
Economics publications, including Global Economic Perspectives
and The House View.
Matthew holds a Ph.D. in Economics from the University of

California, Los Angeles. While at UCLA, Matthew worked at the
U.S. Department of the Treasury in the Office of Financial
Research. Prior to graduate school, he worked as a research
analyst in the macroeconomics department at the Federal
Reserve Bank of Philadelphia.

Appendix 1
Important Disclosures
*Other Information Available upon Request
Prices are current as of the end of the previous trading session unless otherwise indicated and are sourced from local exchanges via Reuters, Bloomberg and other vendors .
Other information is sourced from Deutsche Bank, subject companies, and other sources. For disclosures pertaining to recommendations or estimates made on securities
other than the primary subject of this research, please see the most recently published company report or visit our global disclosure look-up page on our website at
http://gm.db.com/ger/disclosure/DisclosureDirectory.eqsr. Aside from within this report, important conflict disclosures can also be found at https://gm.db.com/equities under
the “Disclosures Lookup” and “Legal” tabs. Investors are strongly encouraged to review this information before investing.
Analyst Certification
The views expressed in this report accurately reflect the personal views of the undersigned lead analyst about the subject issuers and the securities of those issuers. In
addition, the undersigned lead analyst has not and will not receive any compensation for providing a specific recommendation or view in this report. Torsten Slok

Equity Rating Key Equity Rating Dispersion and Banking Relationships
Buy: Based on a current 12-month view of total shareholder return (TSR = percentage change in share
price from current price to projected target price plus projected dividend yield), we recommend that
investors buy the stock.
Sell: Based on a current 12-month view of total shareholder return, we recommend that investors sell
the stock.
Hold: We take a neutral view on the stock 12 months out and, based on this time horizon, do not 600
recommend either a Buy or Sell.
500
53 %
Newly issued research recommendations and target prices supersede previously published research. 44 %
400
300 54 % 48 %
200
100 2 %1 7 %
0
Buy Hold Sell
Companies Covered Cos. w/ Banking Relationship
North American Universe

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US Inequality 25aug17

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Deutsche Bank

DISCLOSURES AND ANALYST CERTIFICATIONS ARE LOCATED IN APPENDIX 1 MCI(P) 083/04/2107.

Inequality is likely an important driver of populism.

It is important for markets to understand the drivers

The bottom line is that inequality is increasing in

Deutsche Bank Deutsche Bank 1

Technological Trade Financial labor market

Source: OECD , DB Global Markets Research

Low inequality in household Higher inequality in household

Average dispersion in labor

Source: OECD , DB Global Markets Research

More equal societies

Source: OECD , DB Global Markets Research

Source: OECD , DB Global Markets Research

Deutsche Bank Deutsche Bank 7

$mn Average pre-tax income in the U.S. in 2014 $mn

Deutsche Bank Deutsche Bank 8

Deutsche Bank Deutsche Bank 9

Top 10% Pre-tax Income Share in the United States, 1917–2015

Deutsche Bank Deutsche Bank 11

250 81st to 99th Percentiles 250

Source: Census, BLS, Haver Analytics, DB Global Markets Research

% Growth rate of federal tax receipts (10 yr MA) %

25 Bush tax cuts

Source: Unequal democracy by Larry Bartels, DB Global Markets Research

Torsten Slok, torsten.slok@db.com +1 212 250-2155

Total money earnings of US population

Source: CBPP, DB Global Markets Research

Deutsche Bank Deutsche Bank 23

% Luxuries Necessities % % Luxuries Necessities %

Deutsche Bank Deutsche Bank 24

Deutsche Bank Deutsche Bank 25

Top 0.1% (above $20 million) Wealth

Bottom 90% Wealth Share in the United States, 1917–2012

Composition of the Bottom 90% U.S. Wealth Share

35% Business assets Pensions 35%

Real average wealth of bottom 90% and top 1% families

Bottom 90% real average wealth

% Percent of total assets held by wealth Class, 2013 %

Deutsche Bank Deutsche Bank 32

Top 1% share of total economy-wide income

Source: WID database, DB Global Markets Research

The top 1% and bottom 90% wealth distribution

% Top 1% % % Bottom 90% %

1980 2012 1980 2012

Source: WID database, DB Global Markets Research

25% Canada United Kingdom 25%

100% U.S. Germany France U.K. 100%

% Dividend income tax (ls) Corporate income tax (ls) %

4 Total population Bottom decile Top decile 4

Deutsche Bank Deutsche Bank 40

Source: OECD, DB Global Markets Research

Deutsche Bank Deutsche Bank 41

Total Bottom quintile Top quintile

Source: OECD, DB Global Markets Research

Deutsche Bank Deutsche Bank 42

Source: Piketty (2014), DB Global Markets Research

Deutsche Bank Deutsche Bank 43

Source: OECD Wealth Distribution Database., DB Global Markets Research

Deutsche Bank Deutsche Bank 44

Net household wealth, Bottom quintile

Source: OECD Wealth Distribution Database., DB Global Markets Research

Deutsche Bank Deutsche Bank 45