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How should income inequality be calculated?

Protesters with the
Protesters with the "Occupy Wall Street" movement demonstrate before walking up 5th Avenue to rally in front of the residence of NewsCorp CEO Rupert Murdoch.
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A commonly cited figure concerning the wealth gap has it that the top 1 percent in the US own 42 percent of the wealth.

But a new paper from Brookings Institution has found that the chasm is smaller when using another method of measurement.

The Brookings study’s authors — including three Federal Reserve economists — took into account government benefits like Medicare, Medicaid and food stamps economically disadvantaged Americans receive when calculating income inequality. Those contributions, the report finds, increase the incomes of lower-income earners thereby shrinking the size of the wealth gap.

Using that methodology, the wealthiest 1 percent own 33 percent of overall wealth in the US.

What is the best way to calculate income disparity? Is it fair to include programs like Medicare into the calculation?

Measuring income and wealth at the top using administrative and survey data


Aparna Mathur, a resident scholar in economic policy studies at the think tank American Enterprise Institute, where her research focuses on income inequality and mobility and other subjects

Christian Weller, a senior fellow at Center for American Progress, a DC-based  policy institute. He is also a professor of public policy at the University of Massachusetts, Boston