Posted by Jay Livingston
In the previous post, I suggested that much of the fluctuation in mean income (but not median income) in this century was accounted for by the changing fortunes of the very rich. Here are some relevant graphs showing the share of income going sectors among the top 10% of families. The first one shows the share of total income going to the all but the top 1% – the 90th to 95th percentiles and the 95th to 99th.
These folks are not poor – the lower group averaged $110,000, the upper group $177,000 – and their incomes have increased faster than those of those below them. That’s why their share of all income increased from about 24% in 1973 to 27% in 2005. But the changes are not dramatic. The difference in the lower group, the 90th to 95th percentiles, is essentially unchanged. The upper group increased its share by a factor of 18%.
Now here is the top 1%, all except the tenth of one percent of the population, the top 145,000 families. Here too, I’ve divided them into two.
The “poorer” half of this 1% (average income $370,000) increased its share from 2.7% to 4%. The share of the upper half (average income $696,000) went from 3.2% to nearly 6%. As in the first graph, the richer half got even richer than did the lower half – an 87% increase compared with a 47% increase.
But what about the truyly rich, he top tenth of 1% of families – with incomes well over $2 million? Their considerable incomes show much larger fluctuations.
The overall trend is a big increase. Their share of total income doubled. It is also in this group that we see the effects of the dot-com boom (1995-2000) and bust (2000-2003). In 2004 and 2005, they seem to have gotten their groove back.
(Note: these graphs are based on data published by Piketty and Saez based on tax returns. The figures for income do not include capital gains. If capital gains were included, the differences between the very rich and the rest would be even larger.)
Here’s one final picture showing that the largest effects of the Internet bubble occurred at the top. It shows the ratio of CEO income (including bonuses and stock options) relative to that of the average worker.
The billowing and bursting of the Internet bubble is obvious. But smoothing out the curve also shows the general trend towards increasing inequality.
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