Non-Partisan Income Shares Blogging

Here's another look at the income inequality picture that has nothing in particular to do with George W. Bush. Here we see the share of national income going to the 90-95th percentiles, to the 96-99th percentiles, and to the top one percent. During this time period, the share going to each of the bottom four quartiles declined, and the share going to the 80th to 89th percentiles also declined. The 91st to 95th percentiles stayed basically the same. Those relative losses across the entire bottom 90 percent of the distribution accrued to the top five percent.

And as you can see here, the vast bulk of the action is within the top one percent. The top one's share, clearly, is pretty volatile and seems to be pretty closely tied to the waxing and waning fortunes of the stock market in a way that the rest of the top five percent's income isn't. That's something to keep in mind the next time you're pondering whether or not it makes sense for economic news coverage to be so focused on stock issues -- this seems to be much more important to the top one percent than to everyone else.

Comments

there are roughly 120M households in america, and if you really dig into it, you'll find that the action that you're attributing to the top 1% is mostly taking place in the top tenth of that 1%, or roughly 120,000 households.

Posted by howard | December 14, 2007 4:43 PM

The income of the top 1% has been very volatile over the years, and as Matt suggests a lot of it has to do with fortunes of the stock market. The amazing thing is when you break the data down per person. I show some of this, along with my own pretty pictures that illustrate these changes over time on my blog here:

http://afferentinput.blogspot.com/2007/12/if-america-had-100-and-100-people.html

Posted by CKT | December 14, 2007 4:56 PM

This graph doesn't really suggest much about the importance of stock issues to the lower 99%. Gains and losses of individuals in the 91-95% and 96-99% groups could be tied just as closely to the stock market as the 1% group, even if we can't see this volatility because gains and losses of individuals wash out in a quadrupled sample size.

Posted by Sean | December 14, 2007 5:14 PM

After the earlier discussion of the Krug-Man's blog post, I looked again at Berkeley economist Emmanuel Saez' various discussions of income distribution trends.

http://elsa.berkeley.edu/~saez/

If you go to Saez' page, all the articles are available as PDF's, but here is a pic made from his graph of the trends for the top 0.1 and 0.01 percent of income earners.

http://i99.photobucket.com/albums/l291/enbuenora/Income-Tippety_Tops.jpg

Here is a version from one of the spreadsheet files:

Thresholds and Average Incomes in Top Income Groups in 2005

Income including realized capital gains

Percentile threshold…..Income threshold

Top 10% …...…………...$99,234
Top 5%..........................$140,125
Top 1%..........................$350,501
Top .5%.........................$545,933
Top .1%......................$1,722,926
Top .01%....................$9,585,705

………………Number Families. …..Avg Income
………………………………………………..
Full Population…...145,881,000..........$51,366
Bottom 90%...........131,292,900……...$29,487

Top 10-5%.................7,294,050.........$114,802
Top 5-1%...................5,835,240……..$195,742
Top 1-0.5%...................729,405……...$425,821
Top 0.5-0.1%................583,524……..$871,546
Top 0.1-0.01%..............131,293........$3,342,190
Top 0.01%......................14,588…..$26,340,290

...the top percentile has gone through enormous fluctuations along the course of the 20th century, with a drop by more than 50% from 1913 to the 1950s: the share of total income received by the top 1% was about 18% before WWI, and it was only about 8% during the 1960s–1970s. The top percentile share declined during WWI, recovered during the 1920s boom, and declined again during the great depression and WWII. This very specific timing, together with the fact that very high incomes account for a disproportionate share of the total decline in inequality, strongly suggests that the shocks incurred bycapital owners during 1914 to 1945 (depression and wars) have played a key role. The negative effect of the wars on top incomes can be explained in part by the large tax increases enacted to finance the wars. During both wars, the corporate income tax (as well as the individual income tax) was drastically increased and this reduced mechanically the distributions to stockholders...

Figure 2 [the linked pic] shows that the fluctuations are even more dramatic for the very top groups (top 0.1% in panelAand top 0.01% in panel B) and are remarkably parallel for the United States and Canada. The top 0.01% share in the United States was 8 times higher in 1915 than in 1973. From 1973 to 2000, the top 0.01% share was multiplied by 6.

This would go along with the view of social scientists such as G. William Domhoff, who place the real right wing counter-attack against labor and the New Deal gains as beginning in the middle of the 1960's and really getting traction in the early 1970s, reaching the presidency with Ronald Reagan.

Moreover, thanks to...now-it-can-be-told interviews with corporate lawyers and National Labor Relations Board officials, we also know that the moderate conservatives felt so threatened by a labor board decision in 1962 giving unions the right to bargain over outsourcing, subsequently upheld by the Supreme Court, that in 1965 they quietly started to organize a counteroffensive to reverse the decision. It was victory in this battle, finally achieved in the early 1970s, in conjunction with the attack on construction unions that began in the late 1960s as part of the fight against inflation, that spelled the beginning of the end for the limited power labor unions had achieved. Once outsourcing was no longer an issue that could be contested by unions, the internationalization of American corporate production could take place at a faster pace in the face of the increased European and Japanese competition in American markets. This corporate effort also led to the creation of the Business Roundtable, which became the central policy group in the power elite in the mid-1970s, to the shock and awe of many observers...

http://sociology.ucsc.edu/whorulesamerica/theory/mills_critique.html

Posted by El Cid | December 14, 2007 5:20 PM

And that shows exactly why Bush's tax cut on capital gains and to a lesser extent dividends, put so much more money in the top 1%'s hands than everyon else's, and also explains just about every WSJ editorial on the subject of taxes.

Posted by Ugh | December 14, 2007 6:05 PM

Stock ownership does not result in much income. Only dividends and capital gains from trading do that. Hedge funds serve mainly the upper decile and many do trade stocks. Still, unless the investor takes some gains from the fund no income is generated.

I suppose there are plenty of good traders in the top decile who take gains from trading but there are probably just as many bad traders who take losses from trading, making for a wash, approximately.

The biggest income from stocks are probably the recipients of stock options. Billions have gone to management over the last few years.

It is a mistake to focus on income. The most important thing is asset distribution. In the US the top decile now hold over 80% of all assets. The bottom half have essentially no assets. Since most of the middle class has counted on their homes as their biggest asset you know how they are going to fare on that score now.

Fewer of the middle class will have any assets at all. They will continue to have about the same amount of income, just no assets. However they will enjoy permanent debt slavery because the Democrats passed the bankruptcy travesty.. It's a beautifully thing. By 2020 if not before the top decile will hold 90% of all assets. That is the approximate natural equilibrium point of 'free market' capitalism. It's been a long long climb back from the 1890 ideal of the gilded age when the top did own 90%. However the brass ring is within grasp.

Note that in all probability the actual dollar denominated assets of the US might actually fall with the recession vs other currencies. However in the end it isn't that total that counts for the rich, it's the degree of superiority.

(worldwide 2% own 50% or all assets.
http://www.wider.unu.edu/research/2006-2007/2006-2007-1/wider-wdhw-launch-5-12-2006/wider-wdhw-press-release-5-12-2006.htm)

Posted by rapier | December 14, 2007 6:47 PM

Also remember that the individuals in the top 1% aren't very static. The average individual in the top 1% will only be there for a few years of his life.

Posted by Sebastian Holsclaw | December 14, 2007 9:54 PM

next time you're pondering whether or not it makes sense for economic news coverage to be so focused on stock issues -- this seems to be much more important to the top one percent than to everyone else

and the immediate lower classes who help them move that money around

Posted by duffy | December 14, 2007 10:41 PM

During this time period, the share going to each of the bottom four quartiles declined.
Think about that one for a while.

Posted by Chuck | December 15, 2007 2:15 AM

What you should think about for a while is that while the "share" declined, people actually had more money than ever.

Holding out for the comprehensively discredited notion that all wealth is the property of The State, which should decide on how it is "shared", is a sure marker for political futility. Most American voters recognize instantly that people espousing such nonsense are not to be trusted.

Posted by Robert Powell | December 15, 2007 6:45 AM

All wealth is the property of The State, and it should decide on how it is shared.

Most Americans will support this view and we on this blog are obviously proud Bolshevists who will lead the Democratic pawns to our grand statist victory, unless there be someone bold enough to decry our evil plans.

But surely there be no knight so bold, so brave, that he would brave the fake criticisms of "Jennifer" to call us out for our MoveOn.Stalinism.

Posted by El Cid | December 15, 2007 11:26 AM

Thanks, El Cid. Excellent citations. The current Bush administration is rather like the Frankenstein's monster of the righties - wanting permanent war, but wanting also to avoid any adventitious equalizing effect that would come from taxing to pay for the war, they came up with the brilliant plan of distributing all of that FISA cash to the wealthy and borrowing for the war so that the "bottom" 90 percent could pay for it. That was really brilliant. Sick, of course, too.

Liberal politics has forgotten how to play the class war game, but eventually someone will figure it out again, especially if there is a recession. It is pretty easy, actually. It simply consists of appealing to people's self interest, which all lies in narrowing the inequality gap. Americans have been convinced to embrace a paradoxically selfless creed of defending selfish greed, even though this benefits the very few. If they could be made to see that their real selfish interest is in expropriating most of the wealth of the wealthy, and that putting a higher premium on widening inequality, i.e. raising tax rates, or strengthening countervailing positonmakers like unions - would benefit them and their children, one could actually begin to talk about liberalism in the U.S. again. It would be nice to see whether, as I suspect, there is a link between lesser social mobility and the inequality peaks. I would imagine so - inequality itself becomes valuable to those on the top at a certain point, as it provides a bar to entry against competitors. Thus the billionaire still wants his next billion - the value of it being to restrict the number of people clawing their way out of that bottom 90.

Posted by roger | December 15, 2007 11:27 AM

Gains and losses of individuals in the 91-95% and 96-99% groups could be tied just as closely to the stock market as the 1% group, even if we can't see this volatility because gains and losses of individuals wash out in a quadrupled sample size.

Not likely, since individual stocks are highly correlated to each-other. Own more than a few stocks and market risk is the main risk you are taking, as opposed to individual-stock risk. It is far, far more likely than not that when your neighbor's stocks are doing good, so are yours, from the super-rich on down to the poor with $500 in their 401k.

Posted by pjgoober | December 15, 2007 1:42 PM