December 5, 2013

U.S. income inequality, on rise for decades, is now highest since 1928

Credit: Dorsey Shaw Source: Emmanuel Saez, UC Berkeley
Credit: Dorsey Shaw; Source: Emmanuel Saez, UC Berkeley

President Obama took on a topic yesterday that most Americans don’t like to talk about much: inequality. There are a lot of ways to measure economic inequality (and we’ll be discussing more on Fact Tank), but one basic approach is to look at how much income flows to groups at different steps on the economic ladder.

Emmanuel Saez, an economics professor at UC-Berkeley, has been doing just that for years. And according to his research, U.S. income inequality has been increasing steadily since the 1970s, and now has reached levels not seen since 1928. (The GIF file at the top of this post, created by Dorsey Shaw of Buzzfeed, compares growth in average income of the top 1% of Americans with everyone else.)

Using tax-return data from the IRS, Saez has built extensive income-distribution datasets going back 100 years. He defines “income” as pre-tax cash market income — wages and salaries; dividends, interest, rent and other returns on invested capital; business profits; and realized capital gains. He excludes Social Security payments, unemployment benefits and other government transfer payments, which are more substantial today than before the Great Depression.

In 1928, the top 1% of families received 23.9% of all pretax income, while the bottom 90% received 50.7%. But the Depression and World War II dramatically reshaped the nation’s income distribution: By 1944 the top 1%’s share was down to 11.3%, while the bottom 90% were receiving 67.5%, levels that would remain more or less constant for the next three decades.

But starting in the mid- to late 1970s, the uppermost tier’s income share began rising dramatically, while that of the bottom 90% started to fall. The top 1% took heavy hits from the dot-com crash and the Great Recession but recovered fairly quickly: Saez’s preliminary estimates for 2012 (which will be updated next month) have that group receiving nearly 22.5% of all pretax income, while the bottom 90%’s share is below 50% for the first time ever (49.6%, to be precise).

A century ago, Saez notes that the highest earners derived much of their income from earnings on the accumulated wealth of past generations. By contrast, “[t]he evidence suggests that top incomes earners today are…“working rich,” highly paid employees or new entrepreneurs who have not yet accumulated fortunes comparable to those accumulated during the Gilded Age.”

Americans aren’t unaware of these trends. More than half (61%) of Americans said the U.S. economic system favors the wealthy, while just 35% said it’s fair to most people, according to a Pew Research Center survey conducted in March. A similar share (66%) of Americans said the gap between rich and poor had increased in the past five years; nearly three-quarters of respondents said the rich-poor gap was either a “very big” (47%) or “moderately big” (27%) problem.

As one might expect, low- and middle-income people were most likely to say the U.S. economic system favors the wealthy, but even 52% of high-income people agreed that it does. And while 54% of low-income people and 49% of middle-income people called the rich-poor gap a “very big” problem, only 36% of high-income people did so. A third of the high-income group said the rich-poor gap was either a small problem (19%) or not a problem at all (14%).

More than half (55%) of Republicans said the economic system is fair to most people, but majorities of Democrats (75%) and independents (63%) said it favors the wealthy. And 61% of Democrats and 50% of independents said the gap was a very big problem, versus only 28% of Republicans. Four-in-ten Republicans termed the gap either a small problem (22%) or not a problem at all (18%).

Topics: Income Inequality

  1. Photo of Drew DeSilver

    is a Senior Writer at the Pew Research Center.

Leave a Comment

Or

All comments must follow the Pew Research comment policy and will be moderated before posting.

74 Comments

  1. James Stroup2 weeks ago

    Is it just a mater of time before we have a severe depression like we had in 1929 due to income inequality

    Reply
  2. Puiu4 weeks ago

    Strange how Perry sees SS as a Ponzi scheme but few of these pols would say the same thing about Wall St., the TBTFs, where the true, guanagtrran Ponzi scheme is playing out right beneath their noses. And, of course, is padding many of their pockets. The common denominator is anything with a social value related to the common good is bad; anything increasing the wealth of the top 2% [laughingly referred to as the 'job creators'] is good. Few of the current crop of pols are willing to address the national tragedy that is mass unemployment. They flap their lips when convenient. But that’s about it. At least they’re realizing a phrase like jobless recovery’ no longer plays well in Peoria. Nor are many pols willing to recognize [or admit] the link between the downhill slide of a consumer-driven economy when people are unemployed, fear unemployment or have had wages frozen or reversed and have taken on easy debt to make up the difference. The former consumers’ are paying down debt [if they can], buying necessities and squirreling the rest beneath their mattresses. Massive unemployment means zip in demand. Also means reduced tax receipts, starving states, counties, cities, and municipalities. That’s why we’re already seeing pension plans damaged by reckless speculation thrown on the bonfire. Basic services will go, cuts will go to the bone until all that’s left are public assests: highways and bridges, national parks, schools, etc thrown up for fire sale to the same bastards who got the ball rolling. This is called selling the family china. Then having to rent it back to eat lunch. At exorbinent fees. And Rule of Law? Only for those who can afford it.Serfs meet Barons.I think Hedges is [and has been from the start] onto something the trolls in D&R hats have taken the city. We simply cannot or will not admit it.

    Reply
  3. Jeff Renner1 month ago

    I keep seeing economic studies that correlate back to the mid ’70s.

    Somebody should study economic correlations to the removal of gold asset backing from the dollar in 1937 and then the subsequent elimination of the fixed dollar gold price in 1971.

    I think you will find a world of useful information.

    scontent-a-atl.xx.fbcdn.net/hpho…

    Reply
  4. James Williams3 months ago

    I must truly say that the income inequality in America has created a middle society that is struggling to even make ends meet. In America, yes we are the land of the free and the home of the brave but we are also becoming the home of the depraved. I want everybody to think about this denial of opportunities for all. I want everyone who reads this to read it and think about the future of this country and its continuing divide. One day in America the real people in this GREAT COUNTRY is going to get tired of the things that are going on and they will start looking for ways to destroy the Rich People and their families any way they can. How long do you think this will continue before people begin to say, since they don’t care about me and my families and they get tired of struggling in their own country, they will begin to think about plans to do things that they would never have thought of. I truly must say we are the best country and the last country in the world for Humanity. If we loose our humanity in our own country, we are going to become just like the rest of the world that we see on television. We see people from South America to Europe to Ukraine to the Middle East and suddenly coming in our back doors people killing each other not caring about their neighbors loving money instead of loving your neighbor. Wanting to make profits while driving and smiling at the ones you call citizens struggle. We all better wake up because if we don’t try and at least do better for the commonwealth of our county men and women in the United states of America, we are all in trouble. Remember Rome fell within. We are the GREATEST NATION ON THE FACE OF THE EARTH. There should not be a divide among us. We should not let our wealth divide us into a false sense of security. Because whether you are Rich or Poor we are AMERICANS FIRST, and if we loose this we will loose our way of life forever and it doesn’t matter if you are a Rich Family- a Middle Class Family- or a Poor Family. If we do not care about each other because of a CLASS SOCIETY we are in deep trouble and BELIEVE ME THAT AMERICAS ENEMIES ARE WATCHING US VERY CLOSE AND I MEAN VERY,VERY CLOSE. A nation is only strong because of its people. If the people in the Nation become distraught and feel hopeless because of the GREAT DIVIDE, we will all fall. IT DOES NOT MATTER THEN IF YOU ARE RICH OR POOR , BLACK OR WHITE. OR BROWN OR RED. REMEMBER THE COLOR OF EVERY PERSONS BLOOD IS RED and if we start killing each other on a scale that has not been seen since the Civil War, our enemies will walk right in and kill us while we are killing each other. All of us better wake up and take a good look at each other and help each other and if we don’t, we will become just like we see others on LIVE TELEVISION, but this time we will be looking at- US-US- THE UNITED STATES OF AMERICA. I want everyone who reads this to think ABOUT YOUR FAMILIES FUTURES AND THE FUTURE OF US ALL. IF WE BECOME THE WALKING DEAD there is no more life and if there is no more life the fruit of life will never exits again.

    WITH HONESTY AND SINCERITY
    James E. Williams 111
    USA/RET-6
    THE AMERICAN LEIGION
    THE DISABLED AMERICAN VETERANS

    Reply
  5. jon7 months ago

    The essential problem with this sort of argument is a lack of understanding of how money works. I’m definitely a 99%er but that doesn’t mean I feel like someone owes me something to be more “fair”. I get the whole idea of attacking the “American Dream” as an idealistic view of the past, but realistically all the American Dream is, is the belief that given enough hard work and sacrifice it is possible to improve oneself and ones means. As we see more and more welfare type programs established while simultaneously having a media frenzy surrounding the concept of redistribution of wealth, we are essentially brainwashing the 99% into believing that

    A) the American Dream is impossible and therefore you should give up on trying to improve yourself
    B) Because the American Dream is impossible people cannot earn or work towards improvement of oneself, but are in fact automatically entitled to an ever increasing level of comfort and means
    C) If anyone is more successful at improving themselves than you, or has more wealth than you, their success is directly correlated to you having less than them, and somehow this prevents you from becoming successful
    This is kind of hinging on a concept that the only way to be successful is to stomp on a baby, club a seal, and then suck blood from people who are less successful you. The good news is when we look at our actual economic system, money doesn’t function as a limited supply where one person’s possession of wealth can have any realistic bearing on another person’s lack. Redistribution of wealth only really makes sense if we look at money as though it functioned as a limited supply/high demand commodity, and that perspective of money doesn’t work considering A) the rate at which we print money, B) the amount our society functions on theoretical credit that never is or needs to be backed up in hard cash.

    The point is if I were to get pissed as a 1%-er or a 10%-er or anyone who was more successful than me for that matter, believing that their wealth secures my relative poverty (which mind you in a global perspective still put almost every American in the top 1% both looking a people today and people in the history of the world when we look at standards of living), I’m being short sited and refusing to try to improve my situation. Think of money (considering the existence of unfunded liability and credit) as an essentially infinite ocean. People working towards improving themselves are taking buckets, tubs, and truckloads of water from the ocean. Re-distributive policy and philosophy would tell you, you’re incapable of accomplishing anything, you can’t try to get a bucket and start getting wealth for yourself, so you should instead sit on the beach and ask for people who are carrying buckets to give some of their buckets to you as they pass. It then goes on to tell you that if they don’t give you the bucket, someone should come and forcibly take some of their buckets and give them to you. (Credit to Glen Beck on the Ocean Metaphor)

    Now I’m not saying it’s bad to help people or give money away. In fact that’s a great thing to do, but I am saying you shouldn’t let anyone convince you that you aren’t capable of accomplishing anything on your own and therefore need someone to do it for you. When we accept that, we are letting our government and our society treat us as though we are too stupid or too childish to succeed in life.

    Now to what I’m really trying to say…Wake up!!! You are a much more amazing person than you realize if you are a non-disabled person relying on welfare!! I believe in you and your ability to accomplish amazing things that will make your life better and help to improve the lives of people around you who rely on you (family, friends, community). You can do it and you can become successful just by striving to achieve your best, whatever that level comes out to. Don’t let yourself be duped into a mindset of ineptitude and entitlement, and you will accomplish great things!

    If you are a 99%er and this was somehow offensive to you I apologize, I’m actually trying to encourage you. There was a time when I’d just argue and end up hating someone, and I’ve realized that it’s not worth it for me to end up feeling bitter.

    Reply
    1. Greg Bennett6 months ago

      Let’s look at a bit of history instead of opinion which of course I respect, but people watch tv instead of investigating facts.
      1. Before through depression the American economy crashed every few years.
      2.Safeguards were set in place during the depression so that it would never happen again.
      3. In the 70s these safeguards have been removed one by one.
      4. First was the s&l we had bale them out. Then the wonderful bush era. Not only did he deregulate the banking system, We let him slide in a tax decrease to the wealthiest Americans who in turn very wisely reinvested this monies to create jobs, only problem was they invested it in other courntries. ( U think he would have known better since he was a manager in charge of a s&l, one of which got bail out money )
      5. Then came thr banking baleout. When asked Greenspan said he didn’t see it coming, whatever. With a real estate market so hi I saw houses that u would think would be worth 75,000 were selling at 110,000. I was ready to buy a house at that time, but a dear friend, and appraiser told me to wait. He told me Fanniemay and freddiemac were screwing it al up, and it wasn’t going to sustain itself. (So my dear friend jack who is now passed away was smarter than most of the economist, nope they were lying to us.) except for some that were ringing the alarm bell trying to wake people up.
      6. I’m seeing more and more people sink into poverty, and a lot of these people on food stamps, are working everyday, but can’t afford to feed their kids.
      7. It a well understood fact that the middle class is gone. WHY. Are they working well paid jobs, and keeping their money in jars buried in their yards. NO. They have no money, because they no longer have a voice to speak on their behalf. It’s called a union. I am not a big fan of unions. I delt with them with conserns to my business; they are difficult; but without them who is in charge of telling us the value of our work.

      In conclusion. I deeply respect your opinion, and agree with u. Redistribution of wealth is crazy, but the rules by which we live by need to be changed so that we can have a chance to prosper. Here are some things that I think might help.

      If we want to see people have a zest for life, to work hard and play in the yard with their kids, to feel like they live in a society that is pulling for them, then are some things that are critical to achieve this.

      1. We need to be encouraged to vote, instead of making it more difficult.
      2. We need to demand to be informed from our media of factual information instead of opinion journalism. And if u want to share your opinion, show people the facts as to why u have reached the opinion that u are wishing to express.
      3. Remove constraints that seem to weigh people down, like haveing a health care system in place that helps instead of hinders them. The affordable Care Act though not perfect is a great start. I have just acquired health care for the first time in 25 years. I am self employed. We will improve it as we go along, but anyone would agree that someone like myself should have the same opportunity to purchase care.
      4. Encourage people like yourself to share and people like myself to be ready to listen, I believe that that all of us want to see our neighbor, healthily and happy if they are willing to work for it. But they to be able to have enough from their work to do that.
      Thank u for listening. Greg

      Reply
      1. Pderr2 weeks ago

        Most of us are trying to do the best we can to provide for our families: saving for homes,exposing our hard earned capital to risk to raise and educate our children and also save for retirement. Those that in fact do risk there hard earned capital for those purposes are entitled to share in the rewards of a growing economy. In 1993, Congress reformed corporate tax law allowing corporations to deduct what they referred to as”performance based” compensation. In other words, they allowed corporations to give away to corporate executives ,without risk to those executives,tremendous sums of corporate capital in the form of stock options. Since those executives hadn’t exposed their own hard earned capital to market risk,they could and did expose their corporations to risk that was not beneficial to the long term health to the corporation or the economy as a whole. Instead,that form of no risk stock option compensation incentivized many executives to take tremendous risk with corporate capital in an attempt to drive the value of their stock options up and allow them to cash out. These compensation schemes led to the Enron’s,the Worldcom’s,the Tech Bust when Wall Street wrote glowing research pieces on corporate entities that were nothing but hot air…in order to win that company’s investment banking business and most recently resulted in this country’s greatest financial crisis since the Great Depression . What it also resulted in was executive compensation ballooning from 40/1 X the average worker to 450/1 …ratios this country has not witnessed since the Great Depression . As we have found out once again after tremendous economic pain….that the 100′s of billions ,if not more, us corporations spent on these stock option compensation schemes (not to mention the severance packages and golden parachutes)…where the recipients have no “skin in the game”,would have better been spent on R&D or possibly hiring real people to service a corporations existing clients.(been on hold in some phone loop waiting for service lately). Going back to the ballooning ratio for a moment. Does the fact that executive compensation has gone from 40/1-450/1 X the average worker suggest that the GDP is 10x greater….sure doesn’t feel like it. At this time in economic history the US has so much going for it…cheap energy prices,labor prices that are more competive globally, an inexpensive US Dollar. When we determine that there is better way to deploy corporate capital than these compensation giveaways we will be unstoppable. Give us a slow steady economy that improves the well being of all participants fairly.

        Reply
    2. Randy6 months ago

      Yes, A, B, and C are correct.

      Reply
    3. matt5 months ago

      can you give me a few sourcess. I like your comment but im trying to write a 20 page paper on education and some of this informaion factors in. I was wondering if you could help me out by providing me with where you get your info.

      Reply
  6. Denise Paul8 months ago

    This is for my daughter-in-law who wants 2 make me seem uninformed!!

    Reply
  7. Isaiah Shockley8 months ago

    your AMERICAN DREAM !!! AS WE LOOK AT THE RISING COST of living verse hourly wage , billions of tax breaks given to corporations that squander our tax dollars , steal trillions and give it to their CEOs in bonuses !!!! yet congress , the house , mr president can’t come up with a plan to raise the minimum wage !!.yet they say a trickle down theory ??? as they outsource American jobs overseas ???? the staggering rise of homelessness, poverty , children going hungry in the richest country in the world ??? in debt to a communist country ???? didn’t we fight against communism ???? now it a new day war game terrorism ??? where ??right here at home !!called inequality by the eccentric ethnocentric rich and wealthy aristocrats an criminal politicians in Washington !!! time for change ??? you tell me

    Reply
  8. Megan8 months ago

    Here are my priorities for the next phase of Open Government. There is already some momentum forward, but still plenty of work to do. Wiki-bills are critical. More here: whohub.com/meganesque/log

    Reply
  9. Sean8 months ago

    that .gif could not be more misleading. The .gif quickly starts so you can’t see the high disparity in 1928 and then has a nice long pause on the current disparity. designing a .gif like that is editorializing.

    Reply
    1. Bayhuntr8 months ago

      The headline states disparity has never been higher since 1928, exactly how is the gift trying to misrepresent anything?

      Reply
  10. Swiggy8 months ago

    One thing that doesn’t seem to be a part of the equation here is Real Estate. Up until the 1970′s, a person could homestead land for a modest fee, and at the end of 7 years, they could claim the land. To do that, they had to prove themselves and the land. Often, a family would lay claim to the land, they built log homes or even log and mud huts, to live in. Today’s zoning laws would not allow that.

    Today, the average home “owner” is tied into working 30 years to purchase land and build a home, or buy an existing home. Of course, any downturn in the economy would cause them to lose that home if their source of income were interrupted. (layoff, plant closing, or even the economic crisis of 2008, if they were heavily invested)

    Reply
  11. rralar8 months ago

    Maybe because

    1. Since 1928, the population of top tier (1 ~ 5%) people of every field isn’t changing/rising too much — and they’re cream of the crop, and all business would pay whatever they demand to have them.

    2. Vast productivity increase thus business has huge revenue (and profit) to pay these top tiers

    3. Due to globalization, the rest (95%)’s skills just aren’t so special anymore and whoever you think works hard here in the US there are 10x people elsewhere in the world work 10x harder and are happy to be paid 10x less. Call this laziness or whatever you want, it is the reality.

    Putting these 3 togethers, it’s inevitable! Laws of Thermodynamics in economy.

    Solution? Isolationism + Social wealth redistribution = short term solution but would lead to faster long term decline. Other than that, I don’t see much way out until:

    1. the thermodynamics of the whole world economy comes to an equilibrium OR
    2. some major disruption in this thermodynamics system, usually wars…

    Reply
    1. Nancy139055 months ago

      In all these comments, there is so much opinion stated as fact. In response to your premise that there are people elsewhere who would work 10 times harder than an American, my mother would say “name three.” Why can’t we all just admit the economic balance has skewed radically and taht the priority should be to guarantee that everyone is contributing fairly, tax wise, to support the system that generates so much wealth for so few?

      Reply
  12. Dude McBroke8 months ago

    I’m jealous because I’m not rich and angry because I am too lazy to do anything about it.

    Reply
    1. Bayhuntr8 months ago

      So you’re suggesting that 99% of the people of the country are lazy? You don’t believe in wealth incumbency in spite of the fact, that all the facts point to it? What you don’t realize, is if the Koch brothers hadn’t inherited their father’s money they probably wouldn’t even make good Taco Bell managers. What makes a Wall Street guy who finds a loophole to skim off $1 billion a year and pocket it, not lazy? Why is someone who was raised in a community they couldn’t afford a higher education but now works 60 hours a week to raise a family lazy?
      I think what we have in this country, is a lot of people that are too lazy to think.

      Reply
      1. Truthbot7 months ago

        SO your family tree is stuck? Change it. The government can’t fix all of your problems. Nothing about life is fair, but saying that because of the environment that you grew up in is stacked against you, there is no hope. Change your family tree. My family emigrated to this country post WWI. There was not a hand out waiting for them when they got here. And life was tough for them and for my grandparents. They didn’t go to college. They didn’t get hand outs. In fact they were too proud for any of that. So my grandparents grew up in that environment. They learned that life is not fair, to work hard and get the job done. Now two generations ahead of that my grandparents life lessons have be handed down and the family business is thriving. So am I suppose to feel bad that this is the case? I think of all the life lessons I learned from them and how to work hard and to take care of your own business. The government in all of it’s glory teaches exactly the opposite to people. Everyone is “entitled” whether they want to dig their way out of the hole because its not fair. We have become a nation that penalizes a person for success. So perhaps we are too lazy to think. Let the government take care of that too… Oh and the government is such a streamlined model of efficiency we should roll over and let them do what they have done for the last 30 years…

        Reply
        1. Greg Bennett6 months ago

          People aren’t looking for a hand out, they just need to keep bit more for their hard work

          Reply
  13. B West8 months ago

    How would this graph change if the distribution was the same as 1980; how bout taking it all and redistributing it?

    Reply
  14. C.g. Shaffer8 months ago

    This is very redundant, one report after another illustrates the same results – the wealthy are getting wealthier. Stop wasting your money and time to repeat this message over and over again. Why not research something a little more challenging such as: Who are the top 1%? Are they primarily Republicans or are they Democrats? Give us a profile of who they are? Be sure to identify how little or nothing they pay in taxes too!
    This will help illuminate the demographics of the 50% who say that income inequality is of” little importance” and of course it is! When you have it, you want to make sure you keep it and the hell with all those little people – the 99%. If you reported this information, then Americans will know which political party has the wealthiest members (that might help them decide who to vote for). But be sure to include our politicians who daily rape the public of a living wage, health care, pensions, and anything else they can get – because they bow to the wealthy who fund their campaigns.

    Pew – you are asking old questions and already answered questions over and over again. You are wasting my time and the public’s time by reiterating the same old data that has already established a two class system for America – the rich and the poor, the owners and the slaves. Why not do some surveys and research on the impact of income inequality on the destabilization of countries/governments – resulting in Revolutions. Then simply extrapolate the data and run some of the “new magic” algorithms to project the beginning of American Revolution II. That would be some exciting stuff – perhaps you would get a Pulitzer for quality reporting. Try producing some meaningful data Pew – or are you cowards?

    Reply
    1. Greg Bennett6 months ago

      Thank u. Yep. U be correct yep yep

      Reply
  15. Andrew Rei9 months ago

    Well, now….we know from history what happened the year after 1928….
    The big reason, in fact, nearly the whole reason, that we have income and wealth inequality now are those Fascist, Reverse Robin Hood and Upward Wealth Redistribution policies known as the Bush 43 tax cuts. Yes, while the “Fiscal Cliff” deal raised the tax rates of the wealthy, it left alone the thousands of deductions, exemptions and loopholes the wealthy and big corporations use to pay low (or no) taxes. It also left alone the corporate welfare and tax rates, as well. I had 14 confidential sources (all of whom freaked out after the Edward Snowden situation came to light and haven’t talked to me since) and eight of them were focused on financial/tax issues….
    All of them told me what the TRUE COST of the Bush 43 tax policies is…they gave different amounts from 2001 through 2012 and estimated what those amounts would be by the end of this calendar year. The numbers were/are staggering…
    The lowest number given for the cost of those policies was $42 TRILLION…that’s not a mistype…TRILLION…the highest amount I was told was $48 TRILLION. And, that was for the period ending calendar year 2012….I derived an average from the eight different figures and came up with $44 TRILLION through last year and $45.5 TRILLION by the end of this year.
    While I believe that the true numbers are more than half of that ($27-$30 TRILLION), the mere fact that the amount well exceeds our current national debt ($17 trillion) tells you that there’s a huge disparity in income and wealth. I call this type of tax code “Upside Down”, because, the wealthy and big corporations pay a lower effective rate (when they pay anything at all) than the middle class and small businesses. Our tax code needs to be Progressive, not Upside Down…
    If Congress really wants to do something about the income and wealth inequality, they need do just one thing: repeal all of the remaining tax rates, exemptions, loopholes and deductions for the wealthy and big corporations from the Bush 43 tax policies. If that is done, the US Treasury will realize $1.5 trillion more in tax revenue annually, which would wipe out the annual deficit and payments to reduce the national debt can begin. However, with the Republican Party in control of the US House and having enough seats in the US Senate to obstruct bills, the chances of this happening are slim and none…(in Southern accent: “and Slim ain’t doin’ too good in the horsepistol”)….

    Reply
  16. rudolph reindeer9 months ago

    I take issue with the fact that a century ago, highest income earners derived income from accumulated investments of past generations. Today the top income earners are the working rich. I believe that wealth is still in the hands of the same people/groups, and that the accumulated wealth of these individuals has grown exponentially in the last 25 to 50 years.Perhaps this wealth has been shifted to tax havens. and as a result not reported on tax returns, skewing the data; and as a result understating the overall income gap?

    Reply
    1. adam8 months ago

      No doubt.

      The rockefeller family still controls trillions of dollars. Why arent they on the news? Ever? Or the bush regime for that matter; changing policies to bank on a collapsing middle class terrified of terrorism. Makes me seeth

      Reply
  17. Kelly9 months ago

    Where are the sources for thjis article besides Saez and Pew?

    Reply
  18. DumbFarmBoy9 months ago

    “”By 1944 the top 1%’s share was down to 11.3%, while the bottom 90% were receiving 67.5%, levels that would remain more or less constant for the next three decades.
    But starting in the mid- to late 1970s, the uppermost tier’s income share began rising dramatically, while that of the bottom 90% started to fall.”””
    >
    Let’s look at the paradigm shift. throughout the first half of the 20th century most businesses were family owned, the local grocer, hardware, lumber, dry goods, clothing stores, etc. E.G look at Wal-mart at this time. Let’s also look at the number of people attending college, and the mantra “One needs to go to college to get a good job” (used to be “You should go to college, so you don’t have to work as hard as I did” parents said to their children)
    >
    So, who is left to take over the family business? Who is willing to take over the family business? Also, let’s factor in economic conditions. during the 70′s their were a great many adverse economic factors, high interest rates, high inflation, and a great many new government regulations. How many ‘small’ businesses could handle all that? not many. It was the perfect storm. The little guys either went out of business (the owner retired and no one took over), sold out, or were pushed out by the competition.
    >
    What many fail to understand is that, it was the store owners, the family business that primarily made up the middle class.

    Reply
    1. Bayhuntr8 months ago

      After World War II 35% of the jobs were union, those jobs put people in the middle class. We’re down to around 10%, I believe our union now. If business gets its way it will eliminate all unions then there will be nobody speaking for the working class of this nation, zero.

      Reply
  19. Gary W Hummel9 months ago

    In recent years I have often thought that many were re-defining the good life out of regard for the environment and future generations. Now it seems likely more will have to do it out of necessity and day to day survival.

    Reply
  20. radleris9 months ago

    What is the impact on your results of Incomes excluding government transfers? What is the logic of doing so?

    Reply
  21. Packard Day9 months ago

    I completely agree with President Obama. This is a national outrage. We all ought to be holding someone accountable for how the wealthiest top 10% in this country became so incredibly rich these past five years while the bottom 90% either lost ground or simply stagnated.

    BTW: Does anyone know who was the President of the United States during this period? The answer seems to be a mystery.

    Reply
  22. Helen K Galloway9 months ago

    I enjoyed this set of opinions, based on opinion poll data. People who are paid at the minimum wage level struggle to keep their heads above water….could include data about how many families have children who receive free or reduced price breakfasts and lunches at school.

    Reply
  23. Vlad9 months ago

    Labor economists have concluded that undocumented workers have lowered the wages of U.S. adults without a high-school diploma — 25 million of them — by anywhere between 0.4 to 7.4 percent.

    The impact on everyone else, though, is surprisingly positive. Giovanni Peri, an economist at the University of California, Davis, has written a series of influential papers comparing the labor markets in states with high immigration levels to those with low ones. He concluded that undocumented workers do not compete with skilled laborers — instead, they complement them. From 1990 to 2007, undocumented workers increased legal workers’ pay in complementary jobs by up to 10 percent.

    Look how many restaurants operate. Without undocumented labor performing routine tasks, meals, which factor labor costs into the price, would be more expensive. There would also be fewer jobs for waiters and chefs.

    Also, Immigrants spend most of the money they make. Some is sent back to their family but most is spent here for lodging, food, clothing and taxes. Nearly all economists, of all political persuasions, agree that immigrants — those here legally or not — benefit the overall economy. “That is not controversial,” Heidi Shierholz, an economist at the Economic Policy Institute, says. She also says that “there is a consensus that, on average, the incomes of families in this country are increased by a small, but clearly positive amount, because of immigration.”

    Reply
    1. Stuart Brown8 months ago

      So, let me get this straight, increasing the labor supply doesn’t reduce wages, increasing the housing demand doesn’t increase rents, increasing demand on electricity, water doesn’t increase prices, roads don’t become clogged, public transportation not strained, it doesn’t cut wages and increase expenses for the majority. As we say in my country pull the other one, it’s got bells on it, if you can’t understand that, I’m saying it’s a load of rubbish, how can someone from a capitalist country, not understand the iron rules, of supply and demand.

      Reply
      1. Rachel Goldin7 months ago

        You’re assuming the person you’re replying to gives a dang about logic, or other people.

        That’s not the Republican way.

        Reply
  24. Vlad9 months ago

    Massive Illegal alien invasion?
    I guess you forgot about the 2007/2008 crash followed by the Great Recession?
    Not only did American citizens loose their jobs but so did the undocumented citizens to the point where today immigration has “reversed” and more are leaving than coming in.

    Reply
  25. phil9 months ago

    “He excludes Social Security payments, unemployment benefits and other government transfer payments, which are more substantial today than before the Great Depression.” If that is the reason he excludes them, then I challenge his methodology because those are substantial sources of income for most of the bottom quintile income group and the top 1% have seen their tax rates plummet over the years. I would like to see two sets of data, the one reported here and another that includes the effect of government by including transfer payments and income net of taxes.

    NotarySojack-great point.

    Reply
    1. Vlad9 months ago

      How are Social Security payments different from IRA and and other pension plan withdrawals?

      Reply
      1. Rachel Goldin7 months ago

        One is private, the other is publicly managed by the govt.

        Reply
  26. NotarySojack9 months ago

    Income Mobility – is not included. This article implies that the persons in each income category remain the same. It supports the socialist agenda that the system is rigged and the lower income group are helpless. If fact some of the persons in each category can and do move up or down over time. Increased age and experience contribute to improved income. Later, age in retirement reduce income statistics. Education levels contribute significantly to income differences – as it should. Parenthood, especially single parenthood, before the age of 20 limit income potential and income mobility. Check the data and analyses.

    Reply
    1. Glen9 months ago

      You put down the article, which simply presents facts (Pew could be seen as criticizing the Obama Administration in other articles). And I might agree that those who get tips have less need, but the system is rigged by those who control who gets what. Walmart family members make billions while their employees get half of what Costco employees earn.
      Is it socialist to want a minimum floor? To have public education? To have medicare? Social Security? Unemployment insurance?
      Income mobility is a positive and an incentive, but it seems abusive to expect a large part of the population at any age to survive at $16K a year — if they are able to get a full-time job. Just because some can go to college, should we keep a single mother who can’t afford child care and transportation to stay in her place (and her kids lack basic necessities), contending they got what they deserved when the man deserted her? The Northwest has a $9 average minimum wage and we are glad.

      Reply
      1. slk9 months ago

        it is, when other people are paying for it!!! the soviets did, cubans and venezuelans are doing that now!!! but your still here??? canada has universal healthcare, but they still come here for care!!! but with taxing all of the medical industries, you won’t see much more improvements in the medical field, and thats bad!!!

        Reply
        1. Vlad9 months ago

          Please don’t say that the Canadian health system is inferior to ours because some of them come here for medical treatment. That argument will get you nowhere.

          I guess you forget amout the “Medical Tourism” industry in the US?
          Millions of Americans with no insurance or with “inadequate” insurance travel to dozens of foreign countries for their medical treatment which includes a “free” vacation and they save thousands of dollars to boot.

          Yes, we do have the BEST medical treatments but we also have limited access to it by our own citizens.

          Reply
          1. slk9 months ago

            the canadian doctor will see you at 9am on march 10 2014!!! sure people go to mexico and other places, for cheap and inferior treatment!!! thats like buying a chevy and expecting a mercedes!!! please tell me what will happen when all those that get free or discounted ins, and still go to the er’s!!! whats the difference of paying their er visits, or paying for their insurance??? and don’t forget the canadian doctors who practice here, because they ran away from universal canadian care!!! canadian dogs get to see their doctors faster!!!

          2. loomy27 months ago

            slk,

            You are so wrong about Canada’s Health System as well as so many other things.

            I am from Australia.

            Like Canada, we have universal health coverage. It costs our Government MUCH less than the U.S Government pays for health care/costs. You should read a recent Nwe York Times 5 part series on America’s Health Care System.IT IS BROKEN,IT IS VERY EXPENSIVE,IT DOES NOT COVER 40 MILLION CITIZENS…

            Your minimum wages are 3rd World wages. 50% of American workers earn LESS than $25,000 P.A. YOU ARE BEING EXPLOITED,YOU ARE GETTING POORER…

            In Australia, the minimum wage for a 15 year old is $13 and $19 for an Adult.

            BTW, Australia ranks #1 as the country with the best quality of Life in the latest OECD Country report, the same rank as the previous year.

            Last year Australians were ranked the richest people in the World as our wealth is spread much more equally than in the U.S (U.S ranks about 160 for wealth equality (behind IRAN) Australia ranks around 15.

            Your country is being exploited by a wealthy Elite and people like you fall for the crap that they feed you all to readily.

            FIGHT BACK.

            If you don’t, it will just get worse for most of you.

        2. Nom de plume9 months ago

          @slk, It’s simply false what you assert about the Canadian health care system. Canadians love their health care and wouldn’t trade it for the world for the American system which they view as insane, including Canadian conservatives. Around the same time Nixon was sending the U.S. off on the health care journey that has resulted in the debacle of medical practice that it is today, Canadians were starting off on the right foot, and the statistics bear all – that they have far outpaced us on health care since, while we have been steadily declining. BTW, I had a Canadian friend who was injured in the U.S. and we went to the hospital together. Our system is so bad, and theirs is so effective, the U.S. doctors were advising him to fly back immediately even though the health risks incurred in doing so were so great, that it might had amounted to medical malpractice in so advising. But the bottom line was, to allow a person to continue to seek medical service in the U.S. – and when they could do so in Canada – was what amounted to malpractice. It’s not out of stupidity or ignorance that the majority of the medical profession, the majority of the nursing profession, and the majority of the American wants single payer – an improved Medicare expanded to the whole country. It is not the job of the taxpayer or the government to prop up a useless industry that literally causes the deaths of 45,000 Americans every year.

          Reply
    2. slk9 months ago

      how can you better yourself, when all millions do, is cash government assistance checks!!! or spend 10 years at mcdonalds, and demand 15 an hour for flipping burgers!!! just think, growing up, and wanting to get a career at flipping burgers!!!

      Reply
      1. Vlad9 months ago

        If your black and never graduated from high school and the only employer that will higher you in today’s market is McDonald’s, then why shouldn’t an honest, hardworking person work an honest 40 hours a week and get payed enough to pay for rent, food, transportation, insurance and clothing to feed his family… without.. asking taxpayers to subsidize his employer’s payroll?

        Reply
      2. Nom de plume9 months ago

        Like it or not, and label as you wish, but the truth remains, that the system is, indeed, rigged. Tens of millions of Americans work in the fast food industry alone, and tens of millions more just in a place like Walmart for minimum wage and not even at full time. Meanwhile, college has become a way for the government to continue to sweep the issue under the rug by telling people that they should go back to college and “improve themselves and their opportunities,” when the figures show that college graduates are overwhelmingly not getting jobs that require degrees while graduating with debt that far exceeds their abilities to pay it back. So again, it is simply not true what you assert. The opportunities you describe do not exist for this amount of persons presenting toiling in low wage, dead-end jobs. You sound very out-of-touch with the economic and day-to-day realities of people struggling to get by on very little.

        Reply
    3. Vlad9 months ago

      Mr. Sojack…

      Everything you mention is true… however.. it is all occuring in the “99.9″ percent of the population… which, doesn’t have a snowball’s chance in Hell to enter the “0.1″ percent catagory… wake up dude.

      Reply
      1. slk9 months ago

        if all you do is wait for government assistance, how do you get better??? wake up dude!!!

        Reply
        1. Nom de plume9 months ago

          If this is how you feel, then why aren’t you demanding that companies like Walmart pay their workers a liveable wage instead of passing the buck on to the taxpayer, while encouraging those workers to seek food stamps and Medicaid rather than pay them sufficiently or provide the appropriate benefits. The same case exists in places like McDonalds where they are even paying people to tell employees how to go sign up for social service benefits instead of simply paying them sufficient money and providing health care benefits. I described the statistical reality of just how many people work in these industries and where college graduates are presently headed, along with their debts. I think for posters like yourself, you are either incredibly dumb or you are profiting yourself from the system as it exists, and have a monetary interest in putting others down.

          Reply
  27. Pav9 months ago

    numbersusa.com/content/news/dece…

    Senator Jeff Sessions, R-Ala.
    “Harvard professor Dr. George Borjas found that high levels of immigration between 1980 and 2000 caused the wages of lower-skilled American workers to drop nearly 8 percent. He also found current immigration levels have resulted in a $402 billion annual wage loss for workers but a $437 billion increase in profits for business owners.

    Reply
    1. Glen9 months ago

      Alabama usually trails the country in education, economic growth and willingness to help the poor. Too bad. Federal civil rights legislation forced the Deep South to acknowledge the rights of the have nots. Sometimes the majority knows what the entrenched do not.

      Reply
    2. Vlad9 months ago

      I’m sure that from 2000 to 2010 (the lost decade) “outsourcing” led to the wage stagnation of middle class wages (both technical and manufacturing).

      Reply
    3. Stuart Brown8 months ago

      Yes Dr David Suzuki, also sees developed world high immigration, as a con, on their own population and developing world citizens, it ensures low wages, high rent homelessness, high imprisonment.

      Reply
  28. Vlad9 months ago

    Here is an simple explanation of Saez’s graph….

    facebook.com/photo.php?fbid=1015…

    Reply
  29. George A Hutchinson9 months ago

    As long as the income enjoyed by “The Rich” is not deducted from the “Lower Income” people’s pay check; it makes ZERO difference to the people in the lower strata of income (ME) how much money “The Rich” have; period. The ONLY way “money” cannot / WILL NOT help “the economy” is; IF the cash is stashed in a BOX.

    Encourage “The Rich” to buy luxury; expensive houses, yachts, baubles, whatever, and show off their wealth! They are creating and supporting more “good / skilled jobs” than the politicians ever could; in particular, by spending your taxes to buy votes.

    Reply
  30. Scott Dempwolf9 months ago

    So the obvious unasked and unanswered critical question is “what changed in the mid to late 1970′s that accounts for this clear divergence?” Finish the story!

    Reply
  31. Gary9 months ago

    Agree with the overall facts but the chart is misleading to the extreme. Hard to believe that 99% of the working population has had no income gain since 1928. Also, the scale makes it look like the 99% make nearly $0.00 dollars!

    In addition, the statistics are comparing a mostly rural agrarian based workforce to what is currently an extremely urban, almost no actual family farmers left in America, salaried workforce. Not to mention an extremely low tax era before Social Security or any entitlements.

    Definitely brings to mind Mark Twains dim view on statistics being.

    Reply
    1. Vlad9 months ago

      The Marginal Tax rate went well over 90% in the 50′s..

      And, the reason the 99% of the population had such a small growth rate is because Saeze’s numbers where inflation adjusted… here is a simple explanation …

      facebook.com/photo.php?fbid=1015…

      Reply
  32. Hutch9 months ago

    As long as an increase in income enjoyed by “the rich” is not deducted from the “lower income” people’s pay check; WHAT difference does it make how much any “billionaire” makes to anybody in any lower strata of income? ME; for instance. THE only way that (anybody’s) money WILL NOT help “the economy” is; IF they put the cash in a box and leave it there.

    Reply
    1. Chris Tune9 months ago

      I think that is far more important a statement than most will note. Where is it shown what effect others income has upon me? If an affluent person makes more, does that have adverse effect upon my ability to obtain what I need?

      Reply
  33. H. G. Boehm9 months ago

    I would like to see a second set of numbers: an analysis of disposable income, i.e., income after all taxes (federal, State, local, sales, etc.) and income including all government and business (e.g., utilities) transfer payments.

    Reply
    1. Glen9 months ago

      Good suggestion!

      Reply
  34. Larry Stanley9 months ago

    I’m an old staunch Republican, but believe that the favorable capital gains tax must be adjusted upward to eventually equal the sweat taxes paid by working Americans. At the same time lower corporate income tax rates, thus drawing investment capital back to our shores.

    Reply
    1. C H9 months ago

      Years ago, I thought I was Republican, voted for Reagan, believed in “trickle down”. Now I hear ideas of keeping capital gains and corporate taxes low while also cutting entitlements such as Social Security, Medicaid, Medicare and food stamp programs. How does lowering income taxes on corporations, who already manage very well to lower their taxes through loopholes, help when the money then goes to those at the top of the corporation while wages and benefits continue to stagnate for the general workers? Why not close loopholes, let them take more reasonable wages and dividend income and use the plenty left over for capital and for better wages for those below? I’m not falling for the “investment capital” ploy like I did “trickle down” when the problem was then and is now greed at the top. That is what this article is showing. It effects all of us because there isn’t enough money available for our government to run. Besides stagnant wages, our country is falling apart through lack of maintenance. Many can’t afford college or end up with huge debt to get a degree. In order to be fair, Republican economic ideas depend on the wealthy playing fair. Since that doesn’t happen, (several economic scandals come to mind) the taxes for the wealthiest should be increased back to the way it was pre-Reagan and corporate taxes should go up. Look at the statistics in this article!

      Reply
      1. Thomas R9 months ago

        “who already manage very well to lower their taxes through loopholes”

        I think our rate is still a bit above average even when that’s considered. Also I wonder if the loophole issues are as true for corporations that make over $335,000, but less than $10,000,000.

        Reply
  35. K Brown9 months ago

    Drew,

    Interesting piece. Is there a particular reason for stopping at 2007? Curious what it looks like for the following years.

    Also, what do you think caused the dip around 2002? That’s about the time the 911 attacks occurred and would that be due to the dip in the stock market by any chance?

    Thanks for any comments you may have,

    KB

    Reply
    1. Glen9 months ago

      There was a recession in 2002 only slightly related to 9-11.

      Reply
    2. Drew DeSilver9 months ago

      Hi, KB: I don’t know why the fellow who did the GIF stopped at 2007, but Saez’s data are through 2012. I looked mostly at income shares rather than average incomes, so I can’t say for sure what the post-2007 trend there would be (I’m away from my data at the moment, so can’t check).
      Glen: The recession I was referring to ran from March-November 2001 per NBER: nber.org/cycles/US_Business_Cycl…

      Reply
    3. Drew DeSilver9 months ago

      Now that I’m back in front of my main computer (had to take sick-kid leave yesterday p.m.), I can see that average real income for the top 1% fell from $1.51 million in 2007 to $1.26 million in 2012. For the bottom 99%, average real income fell from $49,674 (2007) to $44,071 (2012). (Saez likely will revise those 2012 numbers next month, after more IRS tax-return data is released.)

      Reply