Inspired, no doubt, by the Occupy Wall Street protests, I’ve seen quite a number of posts and articles on the subject of income inequality. The first, from Barry Ritholtz, largely consists of several graphics illustrating income distribution gains from 1917 to 1981, 1982 to 2000, and 2001 to 2008. I won’t reproduce those here; go on over there and take a look at them.
As you might expect over the last 10 years the overwhelming preponderance of the gains have gone to those in the top 1% of income earners, smaller gains have gone to those in the next highest 9%, while those in the bottom 90% have seen no gains whatever. Indeed, they’ve seen declines. In the prior two periods the lowest 90% saw more gains but the top 1% have seen the greatest income gains throughout the 91 year period illustrated.
I think I interpret these charts a little differently than Barry does. What I see is an exponential curve in income growth among the highest income earners throughout the period. I don’t think it slices quite as neatly into the BR (before Reagan), AR (after Reagan), and AB (After Bush) epochs he apparently does. There may be some of that but I think I see a long term trend at work.
However, note that the incomes of all of the top 10% of income earners grew over the entire period, not just the top 1%.
The second post is a very interesting one from Mike Konczal on how the top 1% (and the top .1%) of income earners earn those incomes. Pay particular attention to the first two tables (Mike hot-links the first one which I think is rude). I won’t reproduce them here but I will put a few numbers behind them: the top .1% of income earners comprise about 140,000 people and the top 1% about 1.4 million people.
In 2008 the six categories with the largest number of individuals among the top .1% of earners were non-financial executives, managers, and supervisors (40.8%), financial professionals including management (18.4%), the idle or deceased rich (6.3%), lawyers (6.2%), real estate (4.7%—I expect the numbers for 2011 would be somewhat different), and medical professionals.
In 2005 the six categories with the largest number of individuals among the top 1% of earners were non-financial executives, managers, and supervisors (31%), medical professionals (15.7%), financial professionals including management (13.9%), lawyers (8.4%), non-financial computer, math, technical, and engineering professionals (4.6%), and the idle rich or deceased (4.3%).
Let’s put some more numbers behind those: the top 1% of income earners make about $380,000 per year while the top .1% make a couple of mill.
One last note before I launch into the things that concern me: quite a number of the lawyers who are among the top 1% or top .1% of income earners are, basically, camp followers of the financial sector and there has been a bloodbath among them over the last five years. I expect lawyers’ position in these rolls to change pretty dramatically. Some, too, are the Michael Jordans and Bill Gateses of the legal profession. They do make a lot of money but there really aren’t very many of them.
Okay, here goes. Here’s what worries me about this:
- Too many of those in in the top .1% but, particularly, the top 1% of income earners are rent-seekers, clients of the government. The situation is even worse for the top 10%. A pair of GS-10s working in DC are in the top 10% of income earners (FBI special agents start as GS-10s).
- We’ve redoubled our efforts at bailing out and subsidizing the top .1% and the top 1% over the last four years. What would these tables look like without all of the subsidies? There’s no way to tell.
- We’ve been so afraid of destabilizing the financial sector that they’ve effectively been indemnified not only against financial loss but against civil and criminal penalities. That’s infuriating not to mention counter-productive.
- The categories that the Occupy Wall Street protesters have been dividing the country into, the top 1%/the bottom 99%, are wrong. We should be contrasting the top 10% with the bottom 90%.
- I think that the bottom 90%’s problem is a combination of globalization, massive immigration of low-skilled and semi-skilled workers from Mexico, and the healthcare system. Most of the income gains the bottom 90% might have seen have gone to healthcare spending.
- I don’t see any plans on the table that would do much for the bottom 90%.
- I do see plans on the table under which the top 1% would subsidize the next 9%. I don’t think that solves whatever problem of income inequality that we have.
- The trends have been in place for a very long time.