Richest 1 percent earn biggest share since '20s

Top 10 percent take home a record 48.2 percent of total earnings in U.S.
Associated Press
Sep 11, 2013

The gulf between the richest 1 percent and the rest of America is the widest it's been since the Roaring '20s.

The very wealthiest Americans earned more than 19 percent of the country's household income last year — their biggest share since 1928, the year before the stock market crash. And the top 10 percent captured a record 48.2 percent of total earnings last year.

U.S. income inequality has been growing for almost three decades. And it grew again last year, according to an analysis of Internal Revenue Service figures dating to 1913 by economists at the University of California, Berkeley, the Paris School of Economics and Oxford University.

One of them, Berkeley's Emmanuel Saez, said the incomes of the richest Americans surged last year in part because they cashed in stock holdings to avoid higher capital gains taxes that took effect in January.

In 2012, the incomes of the top 1 percent rose nearly 20 percent compared with a 1 percent increase for the remaining 99 percent.

The richest Americans were hit hard by the financial crisis. Their incomes fell more than 36 percent in the Great Recession of 2007-09 as stock prices plummeted. Incomes for the bottom 99 percent fell just 11.6 percent, according to the analysis.

But since the recession officially ended in June 2009, the top 1 percent have enjoyed the benefits of rising corporate profits and stock prices: 95 percent of the income gains reported since 2009 have gone to the top 1 percent.

That compares with a 45 percent share for the top 1 percent in the economic expansion of the 1990s and a 65 percent share from the expansion that followed the 2001 recession.

The top 1 percent of American households had pretax income above $394,000 last year. The top 10 percent had income exceeding $114,000.

The income figures include wages, pension payments, dividends and capital gains from the sale of stocks and other assets. They do not include so-called transfer payments from government programs such as unemployment benefits and Social Security.

The gap between rich and poor narrowed after World War II as unions negotiated better pay and benefits and as the government enacted a minimum wage and other policies to help the poor and middle class.

The top 1 percent's share of income bottomed out at 7.7 percent in 1973 and has risen steadily since the early 1980s, according to the analysis.

Economists point to several reasons for widening income inequality. In some industries, U.S. workers now compete with low-wage labor in China and other developing countries. Clerical and call-center jobs have been outsourced to countries such as India and the Philippines.

Increasingly, technology is replacing workers in performing routine tasks. And union power has dwindled. The percentage of American workers represented by unions has dropped from 23.3 percent in 1983 to 12.5 percent last year, according to the Labor Department.

The changes have reduced costs for many employers. That is one reason corporate profits hit a record this year as a share of U.S. economic output, even though economic growth is sluggish and unemployment remains at a high 7.2 percent.

America's top earners tend to be highly paid executives or entrepreneurs — the "working rich" — instead of elites who enjoy lives of leisure on inherited wealth, Saez wrote in a report that accompanied the new analysis.

Still, he added: "We need to decide as a society whether this increase in income inequality is efficient and acceptable."

 

Comments

Contango

Re: "Strip every 1% of everything they have and you still will have a 1% class."

Good point.

My late father-in-law used to say that if all the wealth in the U.S. was redistributed, that within about six months that the ratios of wealthy to poor would be about the same once again.

I'm saddened at the stories of poor people who win millions in a lottery and within a short period end up stone cold broke again.

Poverty and financial ignorance go hand-in-hand.

Several yrs. ago I read "The Millionaire Next Door" and it changed my perspective.

http://en.wikipedia.org/wiki/The...

The "rich" are not who most think they are.

2cents

"The "rich" are not who most think they are"

So true, I have met a lot of people and the true wealthy are sleepers, At least the ones I have met earned every dime, not like over paid ball players, Hollywood new and lottery winners who : )

Contango

Re: "The 'rich' are not who most think they are"

As is said: Those that got it don't flaunt it, and those that flaunt it ain't got it.

Old saying: Champaign tastes and beer pockets.

Many who the world perceives to be wealthy are stone cold BROKE.

EZOB

CHANGE THE PERCENTAGES IF YOU LIKE BUT HERE IS THE BREAKDOWN AS I SEE IT!
Upper 10%-- Obviously have p[lenty of money to live a life of luxury and are very rich.
Bottom 40%--Most have failed to further their education and a lot didn't graduate from High School. They are living a relaxed life and almost totally living on government hand-outs. They have become addicted to a lazy life and naturally want everyone to pay more so they can receive more.
40%-90%-- Here is where I and most of the people I associate fall into this group. We are true Americans and a lot of us served in the Military, that's what we were suppose to do. We came from hard working families that weren't necessarily poor but had very little or nothing for us to inherit. We have lived with strong and dedicated work ethics. Our hearts go out further to the handi-capped or mentally challenged but on the other hand have very little, what's that word that is between Sh#t & Syphilis? Oh yea, Sypathy, we have very little tollerance for those that choose not to work. Especially the moochers with 5-10 kids and different fathers who keep breeding to receive more money.
One day the well will run dry!

Contango

Re: "One day the well will run dry!"

A foretaste of when the national federal transfer of payments check one day comes back stamped NSF?

"Malfunction Causes Food Stamp Debit Cards to Fail"

http://www.nytimes.com/2012/11/1...

grumpy

"upper 10%-- Obviously have p[lenty of money to live a life of luxury and are very rich."

I think if you read the links I provided you would adjust your numbers to maybe the top 2% orperhaps the top 3%, depending on where you live. NYC, Boston, San Fran, and others on either coast where housing costs are much higher than here, takes much more to live decently. Here is an article with the breakdown of percentages.

http://www.financialsamurai.com/...

http://www.kiplinger.com/article...

http://www.freemoneyfinance.com/...

The bottom link explains the difference between wealth and income rather well.

AJ Oliver

What the article reported is a trend toward much more concentrated income and wealth in the U.S.. Of course all societies are unequal, and always will be, but the question is how much inequality is compatible with democracy? Plato discussed that issue long ago. Here is what Supreme Court Justice Louis Brandeis had to say on the subject . .
"We must make our choice. We may have democracy, or we may have wealth concentrated in the hands of a few, but we can't have both."

Contango

Re: "how much inequality is compatible with democracy?"

#1. The U.S. is a republic, NOT a democracy.

#2. The "poor" in the U.S. are RICH in comparison to the "poor" in other parts of the world.

http://www.google.com/imgres?img...

#3. Plato believed that a society should be ruled by philosopher kings. GOOD LUCK finding those.

#4. Why do many of the wealthiest counties in the U.S. surround Washington, D.C.? Seems like the "Occupy Wall St." goofballs demonstrated in the wrong city, which would be typical for dumbed-down socialists.

#5. Why are 7 of the 10 wealthiest reps. on Capital Hill Democrats?

Nemesis

Plato was the world's first fascist. Nice place to look for advice, AJ.

EZOB

Contango,
You are right on and I might add that although the Republicans hold a majority in the House (Head Count) the House Democrats are worth more money. I think the Senate is far more distanced and this leads Me to ask you this question. I know we'll never figure this out: How come those so against the rich keep voting Democrat? Check the Break-down of where these people were employed before taking office. Vast majority of Republicans were involved in Business or business owners. Majority of Democrats-Lawyers, the Philadelphia type.

Nemesis

"How come those so against the rich keep voting Democrat?"

Because increased government economic control maintains the status quo - it keeps people in their current economic position. Look at the Consumer Product Safety Improvement Act - Mattel's lobbyists helped write it, and the biggest effect of the new regulations is that it's harder for new businesses to enter their industry and offer them competition. Leftism is great for business IF you happen to already be at the top of the ladder.

The Big Dog's back

Let me think, what happened the last time we balanced the playing field and made the rich pay their fair share (After Great Depression)? We had 40 years of prosperity! Time to do it again!

grumpy

"made the rich pay their fair share"

What would that 'fair share' be?

Bet piddle puppy can't and won't answer that question. He is just mouthing inanities that he read from others. He has NO clue what 'fair share' is.

grumpy

"We had 40 years of prosperity!"

What do you call the late 70's & 80 under Carter with dims in control of the House, and a supermajority in the Senate? That falls well in the 40 year time frame you mouth. That was hardly 'prosperity', misery index, double digit interest rates, double digit inflation, and double digit unemployment. Either you have no clue about history, or you don't think before typing, I wonder which, if not both, is your problem?

Nemesis

We had 40 years of prosperity because our Air Force spent the first half of the 1940's destroying the industrial infrastructure of half of the rest of the developed world, after the German Air Force destroyed the other half.

arnmcrmn

Big Dog is soooo lost. Has no clue and leaves out a lot of information.

His answer.....take all their money away and give it to those who aren't working.

Pete

Oh no! Some people have more money than me! Instead of applying myself and trying to get ahead, I will just sit in my parent's basement and whine. The government should punish others and give my lazy butt their money!

Contango

Re: "We had 40 years of prosperity!"

Including WW2 putz? Fun times huh?

What a Bozo!

kURTje

Sad & funny. In this area you have self made people. M. Sage. Originally from Steuben, Ohio. Among other things he made transmissions for Don Garlits. J.Arnold. Willard, Ohio. Awards from Harley Davidson (way before Orange County Choppers) Owner of TJCycle/Plymouth ,Ohio. Could go on & on. That free thinking is what made America. Not wealth you poor in spirit herd followers. Independence make 1 wealthy; but alas why waste discourse here. You guys are broke.

EZOB

From 1970 to 1988 I started over four times and never filed bankruptcy or defaulted on a loan. This was all on a high school diploma and staying off my A@#. I was raised mostly on a one parent home. Yes, I got into a lot of trouble but you had better work out of it or it's a life of doom. No Pity here.

Contango

Pres. Obama: "You didn't build that."

Mostly true; without funding from their own or outside investments and savings most businesses and entrepreneurs wouldn't have the capital to help make their dreams a reality.

H*ll, many sm. business owners max out their credit cards (debt) in order to get their businesses off the ground and sometimes just to help keep them solvent during tough economic times.

A good line from "The Right Stuff": "No bucks, no Buck Rogers."

arnmcrmn

I have a friend who is starting up a new business. When its all said and done its going to cost him 50K just to get it up and running with no promises, no solid clientele...nothing. Its a risk, but I have no doubt he will make it and could eventually make some really good money doing what he does.

Now in coaster and big dogs eyes......he owes someone something or he is greedy if he ends up making six figures a year.

Contango

Re: "he owes someone something or he is greedy,"

I enjoy reading Martin Armstrong's blog. I thought that he made a good analogy:

"A woman was very demanding and confrontational. Her husband split and eventually met a girl 20 years younger.

The wife then says he left her for the “young girl” he met after the broke up. That is the explanation she prefers because there is no responsibility on her part.

This is the same problem. It is better to say it was the greed of manufacturers seeking low costs rather than to say unions became too confrontational with no sense of competitiveness and politicians kept raising taxes that made the products too expensive and uncompetitive.

It is a two-way street."

http://armstrongeconomics.com/20...

I've started a few businesses; made money on some, broke even on some and on some I lost money.

"Always know your downside." - Donald Trump

arnmcrmn

his is the same problem. It is better to say it was the greed of manufacturers seeking low costs rather than to say unions became too confrontational with no sense of competitiveness and politicians kept raising taxes that made the products too expensive and uncompetitive.

It is a two-way street."

This is America's major problem.

arnmcrmn

Good point above about stripping everything away and in less than a year, it would all be separated out again. Its like sports. No matter what rules are in place, the better athletes will always remain on top.

Contango

As Ludwig von Mises so brilliantly pointed out: Socialism only works in a static society.

EZOB

arnmcrmn,
The more rules gives the better players more of an advantage. I always stated in Pool Playing, Call your shots or bank the eight ball is a definite advantage to the better player. They will adapt faster.

grumpy

You are correct... as long as the rules are enforced. What is problematic is when rules aren't enforced and more rules (regulations) are added. Look at what happened when BP had the Gulf leak. If the regulations had been enforced we wouldn't have had the blowout, we wouldn't have stopped pumping oil out of the Gulf... the drilling rigs wouldn't have left the US fields. The pipeline from Canada wouldn't have been so hard to pass for use. Since then more regulations have been passed, which are not necessary had those that were existing , but not enforced. That is but ONE example of not enforcing the regulations as written.

Contango

Re: "What is problematic is when rules aren't enforced,"

IMO, the major issue was the GM & Chrysler bankruptcies where new rules were made up as the Admin. went along.

Decades of bankruptcy law was ripped up!

Assets were stripped from bondholders and others and GIVEN to unions!

Investors thought that the "game" was "21." The Admin. said, oh no, it's "25."

Anyone who doesn't see the fascistic nature of this Admin. doesn't know sh*t about business and finance.

Nemesis

And yet you defended this in another thread.

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