The recovery is in full force for people who earn the top incomes in the nation, but that’s only widening existing gaps between the rich and the poor, according to a new income inequality analysis from University of California, Berkeley economist Emmanuel Saez and his colleagues at the Paris School of Economics and Oxford University.
Based on 2012 tax data, the researchers found that the top 1% of incomes in the United States took in 19.3% of household income, the largest proportion of overall pre-tax earnings on record since 1913 (when the IRS started publishing tax statistics).
The top 1% of earners also took in a whopping 95% of whatever gains were made in the recovery from the recession, and the top decile took in 50.4% of 2012 income. (Note: The analysis didn’t take into account health benefits, unemployment, or Social Security for the rest of the population, but we can probably assume those wouldn’t greatly upset the gap between richest and poorest in this country.) Saez gives us the detailed stats:
From 2009 to 2012, average real income per family grew modestly by 6.0% (Table 1). Most of the gains happened in the last year when average incomes grew by 4.6% from 2011 to 2012.
However, the gains were very uneven. Top 1% incomes grew by 31.4% while bottom 99% incomes grew only by 0.4% from 2009 to 2012. Hence, the top 1% captured 95% of the income gains in the first three years of the recovery. From 2009 to 2010, top 1% grew fast and then stagnated from 2010 to 2011. Bottom 99% stagnated both from 2009 to 2010 and from 2010 to 2011. In 2012, top 1% incomes increased sharply by 19.6% while bottom 99% incomes grew only by 1.0%. In sum, top 1% incomes are close to full recovery while bottom 99% incomes have hardly started to recover.
Saez notes that one of the reasons for such a major jump in top incomes could be attributed to top earners cashing in on investments or real estate to sidestep higher capital gains taxes. But we’ll only find out if this is the case when we see if the figures 2013 buck the current trend.
Wonkblog’s Dylan Matthews writes that this development marks a stark departure from earlier recessions and recoveries–the 1% of incomes only took in 65% and 45% of economic expansions under Clinton and Bush respectively.
Saez’s commentary also explains the 2012 numbers in context: The last time the 1% took home such a huge slice of the pie was a couple of years before the Great Depression, when the 1% accounted for 18.7% of household income. And overall, between 1993 and 2012, the top 1% took in two-thirds of economic growth of real incomes per family.
“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,” he writes. Whether that’s acceptable, he notes, is another necessary conversation.