Economy Recovers for Richest 1%; Income Flat for the other 99%
Despite the old saying, it seems a rising tide does not necessarily lift all boats. According to newly released data, since the end of the Great Recession in 2009 the richest 1% have increased their income by 11.2% while incomes for the bottom 99% actually shrank by 0.4%. As study author Emmanuel Saez, an economist at the University of California, Berkeley, put it, “the top 1% captured 121% of the income gains in the first two years of the recovery.”
That is a stark contrast from the Great Recession years of 2007 to 2009, when average real income for the top 1% fell by 36.3% at the same time that income for the bottom 99% fell only 11.6%. The result was a temporary drop in the top 1%’s income share from 23.5% to 18.1%. As the stock market—upon which the 1% depends for much of its income—has bounced back, so has the income share of the 1%, to about 20%.
Saez concluded that “the Great Recession has only depressed top income shares temporarily and will not undo any of the dramatic increase in top income shares that has taken place since the 1970s.”
Not counting earnings from investment gains, the top 10% of earners took 46.5% of all income in 2011, the highest level since 1917, according to Saez. While Saez generally supports policies to reduce inequality, like President Obama’s proposal to raise the federal minimum wage by 24%, from $7.25 to $9.00 per hour, Saez advocates more aggressive policies, including a top marginal income tax rate of 73%.
The question, writes Saez, is “whether this increase in income inequality is efficient and acceptable and, if not, what mix of institutional and tax reforms should be developed to counter it.”
To Learn More:
Incomes Flat in Recovery, but Not for the 1% (by Annie Lowrey, New York Times)
Striking it Richer: The Evolution of Top Incomes in the United States (by Emmanuel Saez) (pdf)
Richest 1% Battle the Richest One-Hundredth of a Percent (by Noel Brinkerhoff and David Wallechinsky, AllGov)
Economic Recovery Overwhelmingly Went to Top 1%, Who Gained 93% of Growth (by Noel Brinkerhoff, AllGov)
Upset about the Richest 1%? The Top .000003% Own $25 Trillion (by David Wallechinsky and Noel Brinkerhoff, AllGov)
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