I think your conclusion is correct regarding wages being stagnant, but the chart is about income.

Of course, investment income is taxed less than wage income (and is not subject to payroll taxes), which is why this graph will continue in the same direction. Rich get richer, yadda yadda.

Yep. Thanks, neoliberals, you helped the Republicans achieve this goal, by pushing to set up an international system that favors capital over labor.

One other thing is that many in the top 10% actually do make a lot of money through wages (huge wages, but still wages, think big-time lawyers, bankers, etc.) but those in the top 1% most likely make most if not all of their money from investments or other income that is not taxed as wages.

The chart is for income excluding capital gains. If you add capital gains it makes the inequality worse, though not by a huge amount. Even the top 1% still get most of their income from ordinary wages.

If this is the case then why did Ali-Burton move to Dubai.

This can be expected under a plutocratic, fascist form of government like we have now.

those in the top 1% most likely make most if not all of their money from investments or other income that is not taxed as wages.

And not taxed at all if it's in the form of unrealized capital gains. And with no estate tax, those gains can be passed on to their children, who can sell the assets and realize the gains tax-free.

"Today, the wages of everyone below the top 1% are stagnant."
Maybe I misunderstood but I don't think the chart says that at all. It says that the top 10%'s share of total income was unchanged. However, if total income was rising in that period, doesn't it follow that their income was also rising?

One other point, it strikes me that lamenting the relative shares of P95-99 and P99-100 is hardly the full story if we are discussing inequality. Doesn't P0-P90 seem relevant?

Thanks for the update. What, pray tell, is the number to be in the top 1%? $400,000 or so?

Sorry to be lazy...

I'm gonna party like it's 1935!

OK, it looks like in 2004 to be in the top 1, your adjusted gross income was $328,000 or more. So now it is probably around $400,000 (it went up from $295,000 in 2003 to $328,000 in 2004, so figure about $35,000 a year more).

Maybe I misunderstood but I don't think the chart says that at all. It says that the top 10%'s share of total income was unchanged. However, if total income was rising in that period, doesn't it follow that their income was also rising?

Net income might have been rising, but they were still seeing no growth, while the top 1 percent was. And net income might actually mean LESS even if total is rising, because of inflation.

And thing is, if those in the 90th-95th percentile are stagnant, as well as those in the 95th-99th, while the 99th up are growing still...where is that loss coming from? Obviously, it means that those below the 90th percentile are losing out.

why does Capitalism hate America?

EXCLUDING CAPITAL GAINS.

The top 10% income tend to earn a high proportion from capital gains.

Therefore, these figures grossly underestimate income inequality.

It seems as if those with incomes below the median do not exist, let alone matter.

Median wages have been stagnant since the mid-70s. Today, the wages of everyone below the top 1% are stagnant.

Perhaps true, but the chart doesn't show that, it shows that the share of national income for the top 10% and top 5% but not the top 1% are stagnant. The share of national income is not the same thing as either nominal or real per capita wages (income less capital gains is a fair approximation for wages, though not precisely the same thing); this doesn't tell us that either wages, are really flat for the merely rich while rising for the super rich, though it does show us that the share of national income (excl. capital gains) going to the super rich is pulling away from the share for the merely rich.

Excluding capital gains, though, makes it pretty meaningless. Income, after all, is income. I suspect, though, if you included capital gains, the top 1% would be pulling away much faster.

OTOH, while analysis of this kind of thing is mildly interesting, this is precisely the aspect of inequality we don't need to be focussing on; the distribution of wealth between the merely rich and the super-rich isn't directly relevant to most Americans' lives. At best, its a distant hint of what is going on in the ranges that matter, which we ought to be focussing on.

click and download the chart. It has the raw data that the chart is based on.

What scares me is that I make a cool quarter mill a year - not a bad income, I once thought.

The fact is, I don't make near enough to be on the list of people for whom the Republican approach to the economy benefits.

If you were able to break this chart down - see the top 99-99.9 vs the top 99.9-100, you'd likely find a similar pattern - and the distribution of benefits from the various Republican tax cuts would be similaly skewed.

Now, if you make the temporary tax cuts permanent, watch that benefit get even more skewed, with the top 99.90-99.99 percent getting screwed relative to the top 99.99-100%. Have mores indeed.

Liberals still go on about this stuff? I thought you guys traded in "The rich get richer" for "No blood for oil."

Frank J.,

I realize you are a not-too bright troll, but the point is not that the rich are getting richer, but that they are doing so while no one else is.

BTW, one thing on income - not only have median incomes been stagnant (or even falling, lately), but median risk is rising. Corporate jobs are hardly secure, companies are far more free with layoffs, Unions are weaker or non-existant.

Any one of the investment advisors to the wealthy would talk about the concept of risk premium - that additional risk should bring a trade off of increased reward. The fact is, the poor, the average, and the somewhat wealthy have seen their risks go up, but their incomes stay down - a poor trade.

Don't forget the Hedonic Adjustment - because the CPI overstates inflation by 1% or more. Due to the Hedonic Adjustment, everyone's income increases automatically, like magic. Yes. In fact, very very much like magic. Like a big, magical, Invisible Hand. Wheeeee! Yay for the Invisible Hand! Bow down and worship the Invisible Hand!

Do we want to bring back the good old days of Ford-Carter, when the upper 1% only had 8% of the total income? I am not in 90-95, 95-99, or 99+, but my family and I have definitely not gotten poorer, either in absolute terms or inflation-adjusted, since the Carter-Reagan deregulations.

I would conjecture that the economies of India and China track the blue line more than the other lines.

If you look at Saez's data (he's really the top guy working on the "inequality in the top 10%" issue), you can also see just how different today's rich are from the rich of before the Great Depression. Much, much more of their income comes from wages than those of previous generations, and much fewer of the rich are "rentiers".

A note about the Fed: For those worried that the Fed doesn't care, I've been involved with a presentation to a Fed Board on income inequality, and Yellen (the SF Fed President) and Bernanke have both given major speeches about inequality recently. It's certainly an issue.

Regarding "plutocratic, fascist form of government like we have now" and "GWB ... views our nation's wealthiest as his first priority", it should be pointed out that every chance he's had, Kevin Drum (as well as almost every Dem leader and many "liberals") has assisted one of Bush's pet goals. That's one of the ways that those in the 1% make money, and it's also indicative of massive PoliticalCorruption. And, Kevin Drum is right there, cheering them on.

Of course, Dems are free to not think this through, lest they be accused of scapegoating immigrants.

Thanks again for linking to me yesterday and happy pi day. However, in attempting to explain technical notation, you oversimplified. p90-95 is not the share of the top 10%. The share of the top 10% is the sum of p90-95 plus P95-99 plus P99-100. It has grown since 1973. P90-95 (stagnant since 1983) is the share of the second richest 5% not the richest 10%. It is the share of those richer than at least 90% and poorer than at least 5% of the population. The reason the fact noted by Saez, Brad and you is not widely known is, partly, that P90-95 can't be translated into a simple English phrase like "top 10% income share". Of course it is mostly because the lackey's of the top 1% are trying to confuse us.

MatthewRMarler: Do we want to bring back the good old days of Ford-Carter, when the upper 1% only had 8% of the total income? I am not in 90-95, 95-99, or 99+, but my family and I have definitely not gotten poorer, either in absolute terms or inflation-adjusted, since the Carter-Reagan deregulations.

Considering that between 1980 and 2005 real (inflation adjusted) per capita GDP has increased by 66%, "not gotten poorer" isn't saying much.

That's even assuming that the situation of your family's earners, in terms of education, experience, etc. hasn't improved in the last 25 years.

Ah, Kevin.

Couple things here.

First, this does not factor in capital gains. In today's ownership society, that's a huge omission.

Second, median wages have been rising briskly under Bush, it's just that oil prices have offset it somewhat. It is unfair to judge the President's performance on the rise of oil. How do you do it Kevin? HOW DO YOU DO IT?

Third, first you say share of nat'l income for top 1% rose from 16 to 17 percent last year -- A RISE OF 1 PERCENT. But then elsewhere, you say income for everyone else rose by 1 PERCENT!!! Non-story?

Median wages have been stagnant since the mid-70s. Today, the wages of everyone below the top 1% are stagnant.

No, Kevin, your statement is incorrect. Would you mind making a correction? As Cmdicely points out, your chart demonstrates stagnation in the share of income among the bottom 99% -- not that their wages are actually stagnant. These are two very different things. Indeed, your claim in counterintuitive. Although it wouldn't surprise me to learn that, say, the bottom 40% (or 50% or even 60%) have experienced wage stagnation, surely, the top 8 or 9% of Americans have enjoyed real growth in wages (even if their share has diminished).

The rich get richer? No question. But the super rich ( whose income is almost entirely from investments, not wages) are getting super richer. Now how about charts showing the bottom 90% of the population? How about showing wages + capital gains, which is a much truer picture. If we put the entire income of the total population, it just might convince many middle class on the right how they are not doing as well as they thought, especially compared to the top 10%.

And what is this stuff where the top 5% & 10% also includes the top 1%. Then we would see them actually losing money, rather than staying stagnant. Sorry, but this "study" stinks.

um, egbert,

a gain in share from 16% to 17% is not a 1% increase; rather, it's a 1/16 * 100 = 6.25% increase

later in his article kevin quotes saez, who states that the bottom 99%'s share increases less than 1% from 2004 to 2005. i'm going to go out on a titanium limb and assume that saez's remark about the less-than-1% gain is grounded in statistical reality.

Wow. For once Kevin's comments actually contain the intelligent counterpoint to his post that I am looking for! Thanks, guys.

I went to Brad DeLong's post, but he seems to be posting a private correspondence from Saez. So where is everyone getting the link to the numbers and Kevin's chart? Because I want to see Figure A2...

from DeLong's comments, a similar conclusion, but moderated by reasoned analysis:

The huge 86 to 88 increase may be, in part, due to reduced efforts to disguise income as capitol gains and/or corporate profits due to the Tax reform which made tax treatment of different flows more similar and closed loopholes.

For example, there is the company car evasiun in which consumption by a manager is disguised as investment by a firm (most cars in the UK belong to firms with the usufruct granted as a fringe benefit). With the increase in the corporate income tax, reversal of insanely accelerated depreciation and the cut in the top marginal individual income tax rate, this became less attractive.

Similarly, explicit bans and reduced individual income tax rates made the traditional tax shelter unprofitable (in which overstated depreciation makes an investment in a building appear to generate negative income and then a capital gain when it is sold). This implies a reduction in reported capital gains and an increase in reported income with no true changes.

**Now similar increases in the reported top 1% share after the Clinton tax incease and the Bush tax cuts suggest that there is something horribly real going on.**

I would be interested in an attempt to purge capital gains of the effects of stock prices ,housing prices and unimproved land prices (regress and take residuals). I would add the residuals to reported income (as income that was hidden with tax shelters) if I weren't so lazy.

Posted by: Robert Waldmann | March 14, 2007 at 07:54 PM

What I think is interesting is the long-term look. The heyday of the 50s, the "golden era" in conservative eyes, showed the top one percent had a much lower share of the pie and also a steady -- or stagnant if you will -- share.

Of course, Dems are free to not think this through, lest they be accused of scapegoating immigrants.
Posted by: TLB

Damn straight. Illegal immigration has quadrupled since aWol had his little love fest with Vincente Fox. And now he's at again even though the current Mexican president has reneged on the covert Pemex privatization in exchange for unfettered export of their social, political and economic problems to the US. And remittances make up the second largest source of foreign exchange so it's a win-win for all those plutocratic Latin American countries.

5: Number of countries Bush is visiting in Latin America: Brazil, Uruguay, Colombia, Guatemala, and Mexico.

20.3: Millions of these countries’ citizens who reside in the United States.

'Why should the welfare of American citizens be traded off to give a better life to people from other nations intentionally breaking OUR laws? Americans have every right to protect their own economic wellbeing even if it means keeping out people living in deplorable foreign conditions. Will the lefties only be happy when everyone but the wealthy elites in America become working poor? Is this thinking progressive?' - Joel S. Hirschhorn - 'A progressive and populist position on illegal immigration

'"Every nation has an obligation to limit immigration to a number that will not dilute its workforce, but will maintain a stable middle class - if it wants to have a stable democracy. This has nothing to do with race, national origin, or language ... and everything to do with economics." - Thom Hartmann

Yeah, I know this is a dead thread, but Frank J.: Liberals still go on about this stuff? I thought you guys traded in "The rich get richer" for "No blood for oil.
Actually, some of us are capapble of thinking about two entirely different topics within the same hour or so. Few of us with this miraculous talent voted for GW Bush, though.

"Even the top 1% still get most of their income from ordinary wages."

At least you could substantiate that. I'm pretty sure that's not correct. Aside from the tiny number of star athletes & entertainers, the top 1% in annual income are almost exclusively not wage earners.

The top 1% get most of their income as "unearned income" (Capital gains, dividends & interest), and as such pay no payroll taxes on most of their income (a fact that that those who want to raise the payroll tax cap overlook).

One other note: only long-term (held over 1 year) capital gains are taxed at a lower rate. Anything held less than 1 year is taxed at the sames rates as ordinary income.

"We've been living through fairyland budgets where you think you can have tax cuts for free," said Sen. Benjamin L. Cardin

Follow the yellow brick road...

"Some way has got to be found to pay for this war," said Senator Kent Conrad, a North Dakota Democrat who heads the budget committee. "The president's plan is to continue to put it on the charge card. That's no longer a viable strategy."

'We see the foundations of privatization being laid in Iraq by the war profiteers. Billions of dollars in stolen wealth are being hauled out of Iraq by the very same corporations that lobbied for war. War is money and in America money is power to control the political process. It is a vicious cycle that will not end until the people recognize it for what it is and rise up against it.' - Charles Sullivan

During the past 30 years, per capita gross domestic product has about doubled, yet about four Americans in five are actually worse off. All the growth went to the top, mostly to the top 1 percent. - Robert Kuttner - 'The American Prospect

"Repeal the estate tax and within a few decades control over America's productive assets will be in the hands of non-productive Americans who never lifted a finger in their lives except to speed-dial their financial advisors." - Robert B. Reich: 'Estate tax pyramid scheme'

"The huge 86 to 88 increase may be, in part, due to reduced efforts to disguise income as capitol gains and/or corporate profits due to the Tax reform which made tax treatment of different flows more similar and closed loopholes."

**Now similar increases in the reported top 1% share after the Clinton tax incease and the Bush tax cuts suggest that there is something horribly real going on.**

Posted by: Robert Waldmann | March 14, 2007 at 07:54 PM
Posted by: a caveat on March 15, 2007 at 9:24 AM |

I agree that income being sheltered generally resulted in the big dip in the blue line from about 1948-1986. Otherwise the blue line probably would have stayed between the red and green ones that whole period. The "horribly wrong" peaking you see in 1994-2000 corresponds to the dotcom boom and bust. The next peak in 2003-2005 is probably the real estate boom and ... bust. The "horribly wrong" part maybe the ever larger peaks associated with speculation. The blue line peak was 19.5% in 1928. I bet it is close to that now... Hmmmm.

Housing woes deepen in U.S. industrial heartland
http://www.reuters.com/article/domesticNews/idUSN1435600520070315?&src=031507_1126_DOUBLEFEATURE_top_news

[snip]

On a combined basis, Michigan and Ohio accounted for an out-sized 15 percent of foreclosures across the United States in January, the most recent month for which data is available from tracking service RealtyTrac.

Some 546,000 jobs have been lost in the two states since 2000, according to U.S. government figures, as shutdowns and layoffs at auto plants rippled through the economy.

More hardship is expected as announced job cuts take effect and unionized auto workers begin to leave the area or risk running through recent severance packages in the absence of new jobs, analysts said.'

[snip]

Crap. Crap and more crap.

And elsewhere I read that Intel has just announced that they're investing $2.3B in a new plant in...China.

It's an oldie but a goldie: since WW2 people do better under Democratic presidents than Republican presidents. With 1 exception. The best Republican performer (Reagan) bests the worst Democratic performer (Carter).

The kicker is that it's not even a statistically significant amount.

The PR that Republicans pour out for Reagan is phenomenal. And by that I mean "insane".

Elvis: I know exactly where Kevin got the data that the top 1% (even the top .01%) get most of their income from wages. It's on page 51 of this PDF by Piketty and Saez (link), in a chart. The one on the left is the top 1%'s income in 1929, when most income was the way you say, from capital gains. But look at the chart on the right and you'll see that's no longer the case. Running corporations has become more lucrative than owning them.