And the Rich Get Richer

Here’s some news that should surprise no one: the richest 1% made out just fine during the last decade.  For everyone else, well, let us all eat our foreclosures and our life savings!

This news comes from a brand new study by a noted expert in the area (who has written about this subject many times), Emmanuel Saez.  His report can be found here. It is a short report and if you look at Table 1 you will find this statement at the bottom: “For example, from 2002 to 2007, average real family incomes grew by 16.1% but 65% of that growth accrued to the top 1% while only 35% of that growth accrued to the bottom 99% of US families. From 2009 to 2010, average real family incomes increased by 2.3% and the top 1% captured 93% of those gains.”

Saez notes that the largest expansion in income during the past two decades came during the Clinton “expansion” years (1993-2000) where total real income grew by almost one-third (31.5%).  During that period income among the top 1% grew the most (98.7%), but at the same time income for the bottom 99% grew by 20%.  Then during the 2000-2002 recession total real income dropped by about 12% and the top 1% got hit the most (-31%) and the 99% went down by about 7%.  During the Bush “expansion years”  the top 1% made a huge comeback (thanks to the large tax cuts, especially on capital gains) as their income increased by about 62%, while the rest went up by only 7%.  Then came the current recession where between 2007 and 2009 total real income declined by 17%, with the top 1% leading the way (-36%) and the bottom 99% went down by 12%. 

But then comes the real bad news for the 99%: during the recent “recovery” (2009-2010) saw total income go up by 2.3%, but the top 1% once again made out like bandits as their income jumped up by almost 12% while the rest of us went up by a mere fraction (+0.2%).

Saez concludes his brief report with these sobering words:

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. A number of factors may help explain this increase in inequality, not only underlying technological changes but also the retreat of institutions developed during the New Deal and World War II – such as progressive tax policies, powerful unions, corporate provision of health and retirement benefits, and changing social norms regarding pay inequality.


Regarding the influence of unions, a recent study found that between 1973 and 2007, as inequality in hourly wages went up by 40%, the proportion of private-sector male union workers (historically men have been far more likely to belong to unions than women) went from 34% to 8%.  This report noted that the drop in union membership explains one-third of the growth in of income inequality for male workers.

Almost totally ignored in recent studies and commentary about growing income inequality is the growth of those living in poverty, which in turn strongly relates to crime rates and gang membership, the latter of which has been on the rise in recent years, according to the National Gang Center.  So for example, while in 1973 11.5% of Americans lived in poverty, today the percentage is around 15%, according to the National Poverty Center.  According to this source, more than one in five children live in poverty and for minority children the percentages are even higher: 38% of black children and 35% of Hispanic children live in poverty, compared to only 12% of white children.

Despite the rhetoric from the right condemning the “Occupy Movement” as a bunch of whiners, those involved in this movement have the facts to back them up.