Earnings Growth: Better at the Top
U.S. inequality can be measured two ways – by wealth or by earnings. Either way, most working Americans are losing out.
It’s the 1920s again for the richest 1 percent of Americans, and a recent analysis of the wealth gap illustrates why they’re able to live like the fictional Jay Gatsby, portrayed by Leonardo DiCaprio in the new movie, “The Great Gatsby.”
The value of their wealth rises and falls with the stock market. But since the 1960s, they have consistently held 33 percent to 39 percent of the wealth owned by all Americans, including their stock, mansions, commercial real estate, and businesses, according to economist Edward Wolff at New York University. In 2010, the last year examined by Wolff, the richest 1 percent’s share was 35 percent – that was before the Dow flew past 15,000.
The U.S. wealth gap is enormous, partly because most Americans have little wealth to speak of. Most people instead gauge their financial well-being by the size of their paychecks, and income inequality is rising sharply.
Between 1993 and 2011, the earnings of the top 1 percent of U.S. earners grew by nearly 58 percent, after adjusting for inflation. Earnings include salaries, bonuses, stock options, dividends, and capital gains on stock portfolios. That far outpaced the 6 percent rise for the rest of U.S. workers during the same 18-year period, according to a new analysis by economist Emmanuel Saez at the University of California, Berkeley.
Zooming in on the years since the Great Recession, the top 1 percent of earners rebounded while everyone else has continued to see their paychecks shrink. To be sure, both groups suffered during the Great Recession – in fact, the earnings of those at the top fell much more when the economy was contracting.
But in the recession’s aftermath, the earnings for the top 1 percent have gained 11 percent, while everyone else lost more ground. (During the years of economic expansion after the 2001 recession, their incomes surged even more – 62 percent, compared with a 7 percent rise for everyone else.)
The “recovery,” it seems, has really only applied to the very rich, and Saez said he doesn’t see much reason that U.S. income disparities will adjust in the near future.
So, if you’re on a budget, save yourself the price of a ticket to see “The Great Gatsby,” and read the book or rent the less-bad 1974 version starring Robert Redford.
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It would have been helpful if the author had included the definition of the minimum earnings of the top 1% in the article for example is that $100,000. Another factor that was not clearly defined in the article was if the statistics are taking into consideration only individual earnings or are we talking household overall earnings. In my personal opinion, grouping a comparison of 99% to 1% is a disservice to the many income brackets contained in the 99% - severe poverty to upper middle class.
Lara, You're right about my error of omission.According to Saez, the top 1 percent had incomes of $367,000 or more in 2011. And yes, all data in this article are for households, not individuals.Thanks! Kim (blog writer)
I just looked at a Pew Research Report which showed the following:- The distribution of income for the upper class rose from about 30% to 45% from 1980-2010. - During the same period, income distribution represented by middle income earners dropped from about 62% to 45%. - Lower income earner's share remained the same at about 10%.Again from the Pew Research, from 1983-2010, the median net worth by income class showed no growth for lower income earners, no growth for the middle income, but significant growth for high income earners. Middle income net worth remained just below $100,000 while on the upper end, median net worth rose from $300,000 to nearly $600,000. The recent run up in stocks and further recovery of affluent housing markets is not even reflected in these figures.What we are witnessing is the result of failed policy at the highest levels of our government. Some may even see this as a financial coup d'etat.