Since 2009, income growth among the majority of Americans has remained relatively stagnant. But an updated version of economist Emmanuel Saez’s study, “Striking it Richer,” shows that this is not true for the top one percent of Americans.
The study found that since the recovery began in 2009, while the bottom 99 percent of Americans’ incomes have fallen by 0.4 percent since the recovery began in 2009, the top one percent’s incomes have risen by 11.2 percent. So the recovery is only truly a recovery for the wealthiest Americans.
Since the 1970s, the wealthiest one percent increasingly have earned a larger and larger share of America’s income. The recession in the early 2000s and the “Great Recession” starting in 2007 decreased their earnings, but — as the chart below shows — the top one percent still earned more than the next four percent of income earners combined. And since the recovery began in 2009, the top one percent’s incomes have bounced back more than that of any other percentile.
“The labor market has been creating much more inequality over the last thirty years, with the very top earners capturing a large fraction of macroeconomic productivity gains,” writes Saez, an economist at the University of California, Berkeley. He received the John Bates Clark Medal — an award similar to the Nobel Prize given for economics — in part for his research on income inequality with Thomas Piketty, an economist at the Paris School of Economics.
|Top 1 percent of incomes, real growth||Bottom 99 percent of incomes, real growth|
(1993 – 2000)
|98.7 percent||20.3 percent|
|-30.8 percent||-6.5 percent|
|61.8 percent||6.8 percent|
|-36.3 percent||-11.6 percent|
|11.2 percent||-0.4 percent|
Income inequality falls during recessions, but typically bounces strongly back again. After the Great Depression and during World War II, Saez writes, a number of factors kept income concentration from growing, “such as progressive tax policies, powerful unions, corporate provision of health and retirement benefits and changing social norms regarding pay equality.” But this time, the same factors aren’t in place.
Saez writes, “The policy changes that are taking place coming out of the Great Recession (financial regulation and top tax rate increase in 2013) are not negligible but they are modest relative to the policy changes that took place coming out of the Great Depression. Therefore, it seems unlikely that US income concentration will fall much in the coming years.
“We need to decide as a society 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.”