Jump in Income for Top 1%, While Growth Stagnates for the 99%

distributionDuring the recent economic recovery, income increased for the top 1 percent of earners by over 11%. However, these gains did not apply to the other 99 percent of workers, according to new data from the Bureau of Labor Statistics and studies out of the University of California, Berkeley. Americans with a work injury claim fared even worse than the average “99-percenter.”

Berkeley economist Emmanuel Saez looked at numbers that show a mere 1.7% growth in overall income during this period. Yet there was a conspicuous gap between the top 1 percent — whose saw their earnings increase by 11.2% — and the remaining 99 percent of workers, whose earnings actually declined by 0.4%.

Professor Saez, winner of the John Bates Clark Medal, an award in economics considered second only to the Nobel Prize, stated 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.”

Workers’ Benefits

The wide disparity between the highest earners and everybody else can in part be traced to differences in the ways these two classes make money. Wealthy Americans have received a boost from the four-year stock market boom, while high unemployment has persistently held down the income of regular 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 study, Professor Saez said there is no indication that the trend would change in 2012 (that year has not yet been factored into the analysis). In fact, h projects we will likely see earnings for top 1% surge “due to booming stock prices, as well as retiming of income to avoid the higher 2013 top tax rates.” Meanwhile, the incomes of the other 99 percent are projected to grow much more slowly.

Not counting earnings from gains in investment, the top 10% of earners in the U.S. raked in 46.5% of all income during 2011, which marks the biggest since of the American pie since 1917.

Labor Law Attorneys have been concerned by the declining wages of working Americans and continuing inequality. This issue was also front and center in President Obama’s State of the Union address last week. He called for the nation to raise the federal minimum wage from $7.25 to $9 per hour as one strategy for halt the trend, a measure that could boost the status of more than 15 million low-income workers by the year 2015.

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

The data indicate that income inequality — determined by the percentage of income going to the top 1% of earners — had already peaked at a modern high immediately before the onset of the recession in 2009. The resulting financial crisis had a significant effect on wealthy households. Yet in the years since, earnings have bounced back for this group, and many have experienced a full recovery of the level of wealth they had in 2007.

That degree of recovery does not apply to average working families. After adjusting for inflation, median family income has dropped over the past three years. Census data show that in 2011, it remained frozen for the poorest and fell for those at middle income levels. Median household income, which stood at $50,000 in 2011, is 9% lower than it was in 1999, adjusting for inflation.

Of course measures of inequality vary depending on whether economists calculate figures before or after taxes, and whether they take into consideration government transfers like Social Security payments, food stamps, workers’ compensation claims and other credits.

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Emery Reddy