Striking it Richer:
The Evolution of Top Incomes in the United States
(Updated with 2011 estimates)
Emmanuel Saez?
January 23, 2013
Page. 2
"From 2009 to 2011, average real income per family grew modestly by
1.7% (Table 1) but the gains were very uneven. Top 1% incomes grew by
11.2% while bottom 99% incomes shrunk by 0.4%. Hence, the top 1%
captured 121% of the income gains in the first two 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% income will likely surge, due to booming stock-prices, as well as
re-timing of income to avoid the higher 2013 top tax rates. Bottom 99% will
likely grow much more modestly than top 1% incomes from 2011 to 2012.
This suggests 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. Indeed, excluding
realized capital gains, the top decile income share in 2011 is equal to 46.5%,
the highest ever since 1917 when the series start (Figure 1).
Looking further ahead, based on the US historical record, falls in
income concentration due to economic downturns are temporary unless
drastic regulation and tax policy changes are implemented and prevent
income concentration from bouncing back. Such policy changes took place
after the Great Depression during the New Deal and permanently reduced
income concentration until the 1970s (Figures 2, 3). In contrast, recent
downturns, such as the 2001 recession, lead to only very temporary drops in
income concentration (Figures 2, 3).
The policy changes that are taking place coming out of the Great
recession (financial regulation and top tax rate increase in 2013) are not
negligible but they are modest relative to the policy changes that took place
coming out of the Great depression. Therefore, it seems unlikely that US
income concentration will fall much in the coming years.
Page. 6
"The labor market has been creating much more inequality over the
last thirty years, with the very top earners capturing a large fraction of
macroeconomic productivity gains. A number of factors may help explain this
increase in inequality, not only underlying technological changes but also the
retreat of institutions developed during the New Deal and World War II - such
as progressive tax policies, powerful unions, corporate provision of health and
retirement benefits, and changing social norms regarding pay inequality. We
need to decide as a society whether this increase in income inequality is
efficient and acceptable and, if not, what mix of institutional and tax reforms
should be developed to counter it."
http://elsa.berkeley.edu/~saez/saez-UStopincomes-2011.pdf
The Evolution of Top Incomes in the United States
(Updated with 2011 estimates)
Emmanuel Saez?
January 23, 2013
Page. 2
"From 2009 to 2011, average real income per family grew modestly by
1.7% (Table 1) but the gains were very uneven. Top 1% incomes grew by
11.2% while bottom 99% incomes shrunk by 0.4%. Hence, the top 1%
captured 121% of the income gains in the first two 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% income will likely surge, due to booming stock-prices, as well as
re-timing of income to avoid the higher 2013 top tax rates. Bottom 99% will
likely grow much more modestly than top 1% incomes from 2011 to 2012.
This suggests 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. Indeed, excluding
realized capital gains, the top decile income share in 2011 is equal to 46.5%,
the highest ever since 1917 when the series start (Figure 1).
Looking further ahead, based on the US historical record, falls in
income concentration due to economic downturns are temporary unless
drastic regulation and tax policy changes are implemented and prevent
income concentration from bouncing back. Such policy changes took place
after the Great Depression during the New Deal and permanently reduced
income concentration until the 1970s (Figures 2, 3). In contrast, recent
downturns, such as the 2001 recession, lead to only very temporary drops in
income concentration (Figures 2, 3).
The policy changes that are taking place coming out of the Great
recession (financial regulation and top tax rate increase in 2013) are not
negligible but they are modest relative to the policy changes that took place
coming out of the Great depression. Therefore, it seems unlikely that US
income concentration will fall much in the coming years.
Page. 6
"The labor market has been creating much more inequality over the
last thirty years, with the very top earners capturing a large fraction of
macroeconomic productivity gains. A number of factors may help explain this
increase in inequality, not only underlying technological changes but also the
retreat of institutions developed during the New Deal and World War II - such
as progressive tax policies, powerful unions, corporate provision of health and
retirement benefits, and changing social norms regarding pay inequality. We
need to decide as a society whether this increase in income inequality is
efficient and acceptable and, if not, what mix of institutional and tax reforms
should be developed to counter it."
http://elsa.berkeley.edu/~saez/saez-UStopincomes-2011.pdf
