Saez: The Top 1% Captured 121% of the Income Gains in the First Two Years of the Recovery

The inimitable Emmanuel Saez has updated his seminal study, tracking the increasing concentration of income in America. The major takeaway from the study is the top 1% captured 121% of the income gains in the first two years of the recovery. The finding that will attract the majority of media coverage is captured in this paragraph from the study:

“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.”

The huge comparative income gains for those at the top is largely due to the falling incomes of those at the bottom.

The following graph depicts the historical trend of the concentration of income among the top decile group, 1917-2011. Note in 2007 the top decile group, including their capital gains, surpassed the share of income enjoyed by their peers in 1928. The Great Recession had an adverse impact on their share of income but their concentration of income is now trending upward.

Top Decile Income Share 1917-2011

However, the above figure doesn’t tell the complete story of income concentration. Drilling down into the study we find Saez decomposing the top decile’s income share into three groups: 1) Top 1%, 2) Top 5-1% and 3) Top 10-5%.

Decomposing the Top Decile Income Share into 3 Groups, 1913-2011

The above graph depicts relatively flat income shares for the top 10-5% over the 1913 to 2011 time series. The same could be said for the top 5-1% over the entire 1913-2011 period but this cohort has enjoyed rather steady growth in income shares since 1984. The top 1% has experienced greater volatility in their income shares but still command a superior advantage, beginning in 1983.

Drilling down even further we find the very top income earners, the top 0.01%, have experienced increased concentration of income, roaring forward since 1978.

Top 0.01 percent income share 1913-2011

Looking forward to his analysis of income concentration in 2012 Saez forecasts even higher levels of income concentration among the top 1%.

“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…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.”

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Reference

Saez, Emmanuel. (2013). Striking it Richer: The Evolution of Top Incomes in the United States (Updated with 2011 estimates)

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