[Vision2020] Incomes Flat in Recovery, but Not for the 1%

[Art Deco]

  [image: The New York Times] <http://www.nytimes.com/>

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February 15, 2013
Incomes Flat in Recovery, but Not for the 1% By ANNIE
LOWREY<http://topics.nytimes.com/top/reference/timestopics/people/l/annie_lowrey/index.html>

WASHINGTON — Incomes rose more than 11 percent for the top 1 percent of
earners during the economic recovery, but not at all for everybody else,
according to new data.

The numbers <http://elsa.berkeley.edu/%7Esaez/saez-UStopincomes-2011.pdf>,
produced by Emmanuel Saez, an economist at the University of California,
Berkeley<http://topics.nytimes.com/topics/reference/timestopics/organizations/u/university_of_california/index.html?inline=nyt-org>,
show overall income growing by just 1.7 percent over the period. But there
was a wide gap between the top 1 percent, whose earnings rose by 11.2
percent, and the other 99 percent, whose earnings declined by 0.4 percent.

Mr. Saez, a winner of the John Bates Clark Medal, an economic laurel
considered second only to the Nobel, concluded 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.”

The disparity between top earners and everybody else can be attributed, in
part, to differences in how the two groups make their money. The wealthy
have benefited from a four-year boom in the stock market, while high rates
of unemployment have continued to hold down the income of wage earners.

“We have in the middle basically three decades of problems compounded by
high unemployment,” said Lawrence Mishel of the Economic Policy Institute,
a left-of-center research group in Washington. “That high unemployment we
know depresses wage growth throughout the wage scale, but more so for the
bottom than the middle and the middle than the top.”

In his analysis, Mr. Saez said he saw no reason that the trend would
reverse for 2012, which has not yet been analyzed. For that year, the “top
1 percent income will likely surge, due to booming stock prices, as well as
retiming of income to avoid the higher 2013 top tax rates,” Mr. Saez wrote,
referring to income tax increases for the wealthy that were passed by
Congress in January. The incomes of the other “99 percent will likely grow
much more modestly,” he said.

Excluding earnings from investment gains, the top 10 percent of earners
took 46.5 percent of all income in 2011, the highest proportion since 1917,
Mr. Saez said, citing a large body of work on earnings distribution over
the last century that he has produced with the economist Thomas Piketty of
the Paris School of Economics.

Concern for the declining wages of working Americans and persistent high
levels of inequality featured heavily in President Obama’s State of the
Union address<http://topics.nytimes.com/top/reference/timestopics/subjects/s/state_of_the_union_message_us/index.html?inline=nyt-classifier>this
week. He proposed raising the federal minimum wage to $9 from $7.25 as
one way to ameliorate the trend, a proposal that might lift the earnings of
15 million low-income workers by the end of 2015.

“Let’s declare that in the wealthiest nation on Earth, no one who works
full time should have to live in poverty,” Mr. Obama said in his address to
Congress.

Mr. Obama’s economic advisers say that he has been animated by the
country’s yawning levels of inequality, and the administration has put
forward several proposals to address the gap. Those include higher taxes on
a small group of the wealthiest families and an expansion of aid to lower-
and middle-income families through programs like the Affordable Care Act.

The data analyzed by Mr. Piketty and Mr. Saez shows that income
inequality<http://topics.nytimes.com/top/reference/timestopics/subjects/i/income/income_inequality/index.html?inline=nyt-classifier>—
as measured by the proportion of income taken by the top 1 percent of
earners — reached a modern high just before the recession hit in 2009. The
financial crisis and its aftermath hit wealthy families hard. But since
then, their earnings have snapped back, if not to their 2007 peak.

That is not true for average working families. After accounting for
inflation, median family income has
declined<http://www.census.gov/newsroom/releases/archives/income_wealth/cb12-172.html>over
the last two years. In 2011, it stagnated for the poorest and dropped
for those in the middle of the income
distribution<http://www.census.gov/prod/2012pubs/p60-243.pdf>,
census data show. Median household income, which was $50,054 in 2011, is
about 9 percent lower than it was in 1999, after accounting for inflation.

Measures of inequality differ depending on whether they are measured after
or before taxes, and whether or not they include government transfers
like Social
Security<http://topics.nytimes.com/top/reference/timestopics/subjects/s/social_security_us/index.html?inline=nyt-classifier>payments,
food stamps and other credits.

Research led by the Cornell economist Richard V. Burkhauser, for
instance, sought
to measure the economic health of middle-class
households<http://www.nber.org/papers/w17164.pdf>including income,
taxes, transfer programs and benefits like health
insurance. It found that from 1979 to 2007, median income grew by about
18.2 percent over all rather than by 3.2 percent counting income alone.

In an interview, Mr. Burkhauser said his numbers measured “how are the
resources that person has to live on changing over time,” whereas Mr.
Piketty and Mr. Saez’s numbers measure “how are different people being
rewarded in the marketplace.”

“That’s a fair question to ask, but it’s a very different question to ask
than, ‘What resources do Americans have?’ ” Mr. Burkhauser said. Notably,
many of the Obama administration’s progressive policies have been aimed at
blunting the effects of income inequality, rather than tackling income
inequality itself.

Mr. Saez has advocated much more aggressive policies aimed at income
inequality. “Falls in income concentration due to economic downturns are
temporary unless drastic regulation and tax policy changes are
implemented,” Mr. Saez said in his analysis.

The recent policy changes, including tax increases and financial regulatory
reform<http://topics.nytimes.com/topics/reference/timestopics/subjects/c/credit_crisis/financial_regulatory_reform/index.html?inline=nyt-classifier>,
he wrote, “are not negligible but they are modest relative to the policy
changes that took place coming out of the Great
Depression<http://topics.nytimes.com/top/reference/timestopics/subjects/g/great_depression_1930s/index.html?inline=nyt-classifier>.
Therefore, it seems unlikely that U.S. income concentration will fall much
in the coming years.”


-- 
Art Deco (Wayne A. Fox)
art.deco.studios at gmail.com
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