By now you've no doubt read about the latest
report by Emmanuel Saez and Thomas Piketty, economists at the University of California, Berkeley, and the Paris School of Economics, respectively. Kossack
bobswern wrote about it
here. Dylan Matthews at Wonkblog wrote about it
here.
The bottom line: For the first time in the 100 years that records have been kept, the top 10 percent of earners took home half the nation's household income in 2012. Bad enough. But there's more. Shall we cut to chase?
The new data shows that the top 1 percent of earners experienced a sharp drop in income during the recession, of about 36 percent, and a nearly equal rebound during the recovery of roughly 31 percent. The incomes of the other 99 percent plunged nearly 12 percent in the recession and have barely grown—a 0.4 percent uptick—since then. Thus, the 1 percent has captured about 95 percent of the income gains since the recession ended.
That top 1 percent took home 19.3 percent of household income last year. The previous record set in 1927 was 18.7 percent.
Ann Lowrey at The New York Times points out:
Mr. Piketty and Mr. Saez show that the incomes of [the 99%] stagnated between 2009 and 2011. In 2012, they started growing again—if only by about 1 percent. But the total income of the top 1 percent surged nearly 20 percent that year. The incomes of the very richest, the 0.01 percent, shot up more than 32 percent.
There's more analysis below the fold.
Here are two ways to look at some related data: what's happened to median household income in the past 13 years. The red lines show "nominal" dollars. The blue shows the true picture: "real" dollars, that is, dollars adjusted for inflation:
As cited by Doug Short, Gordon Green at Sentier Research describes what the above charts illustrate:
Since December 2011 we have been in a period of income stagnation without any clear trend of direction. Real [inflation-adjusted] median annual household income has essentially remained at the same level over this time period, despite significant reductions in the official unemployment rate, the average duration of unemployment, and a broad measure of employment hardship. The failure of an improved labor market to translate into higher levels of household income raises troubling questions about the types of jobs created over the past year and a half, the level of pay that they generate, and the effect on household income levels from people who have dropped out of the labor force altogether.
Troubling questions, indeed. But this simply illustrates an
acute problem. We have
chronic problems, too. We've been focused for the past few years, perfectly understandably, on trying to establish policies dealing with the acute problems. Obviously not a great job has been done in that regard, in part because some experts have been saying in various ways that they will heal themselves. In fact, one reason we have these acute problems can be found in a key chronic problem, as shown in
this chart:
place holder
About this chart, Elise Gould at the Economic Policy Institute
points out:
What is particularly striking is how the relationship between productivity and most workers’ compensation changed dramatically. From 1948 until the 1970’s, hourly compensation tracked net productivity very closely. As workers became more productive, they were compensated for their increase in productivity. Starting in the late 1970s, hourly compensation began to lag net productivity and has shown very little growth compared to the growing productivity we’ve experienced.
In their study, Saez and Piketty explain what's happened recently and what's likely to happen:
Overall, these results suggest 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. Indeed, the top decile income share in 2012 is equal to 50.4%, the highest ever since 1917 when the series start.
Looking further ahead, based on the US historical record, falls in income concentration due to economic downturns are temporary unless drastic regulation and tax policy changes are implemented and prevent income concentration from bouncing back. Such policy changes took place after the Great Depression during the New Deal and permanently reduced income concentration until the 1970s. In contrast, recent downturns, such as the 2001 recession, [led] to only very temporary drops in income concentration.
The policy changes that took 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.
Exactly so. The entire solution to this problem won't be solved by adjusting tax rates on the upper tiers of American earners. But it won't be solved without doing so.
For 51 years, those rates have been adjusted downward for the highest income levels, with occasional crumbs passed along to those at lower levels. It's way past time to reverse the trend as is obvious from Saez and Piketty's survey. This can't be done with the crew we now have in Congress. The majority there, after all, wants to cut taxes on the richest Americans even more.
