Tuesday, August 18, 2009

Income Distribution

The distribution of income in the United States has (as of 2007, the last year treated in this study) has reached an all time high for earners in the top .01%. According to the following graph, the top .01% now earns 6% of the total income:

Striking it Richer: The Evolution of Top Incomes in the United States (Updated with 2007 estimates); Emmanuel Saez, August 5, 2009.

There are a number of interesting facts about Professor Saez’s (University of California) study. First is the sheer size of the income earned by the top .01%. Total United States income in 2007 was $7,896,000,000,000—that’s $7.896 Trillion, if the zeros make you dizzy. The top .01% of earners got 6% of that amount, or $473.76 Billion. The top .01% works out to about 11,601 households. The average earnings of those households in 2007 was $40,837,859. That’s equal to the income of 813 average households ($50,233). Or, to think about it another way, the top 11,601 households have income equal to 9,431,250 average households.

The other interesting thing about the current distribution of wealth is its change from historical levels. For the fifty years from 1933 to 1983 the top .01% never had more than a cumulative 2.5% of the national income, and from 1943 to 1978—thirty-five years that many of us would consider the best years in the United States—the percentage hovered around 1% of total income for the top .01% of earners.

In other words, in some of our greatest years, the top earners made 100 times the average, while now that number is approaching 1,000 times. I can’t say I know what that portends for the future, but I have a feeling that it’s not a good trend for the middle class.

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