Tag: top incomes

Over 90% of the income gains in the first year of the recovery went to the top 1%

~ MilesCorak ~ 20 Comments

Emmanuel Saez of the University of California at Berkeley has updated his work with Thomas PIketty on the evolution of US Top Incomes to 2010.

He finds that:

“In 2010, average real income per family grew by 2.3% … but the gains were very uneven. Top 1% incomes grew by 11.6%, while bottom 99% incomes grew only by 0.2%. Hence, the top 1% captured 93% of the income gains in the first year of recovery. Such an uneven recovery can help explain the recent public demonstrations against inequality.”

The 10 page update offers a clear picture of how income shares have varied over different business cycles, as well as the long-term trends since 1917. Top income shares fell dramatically after World War II, stayed flat, then began to rise in the early 1980s and have returned to their pre-War levels.

The top 10% in the US take now take home about 47% of all income, but this is driven by the top 1% who account for 20%.

The difference between the business cycle of the 1990s and the 2000s is that the incomes of the bottom 99% grew by 20% between 1993 and 2000, but only by 6.8% between 2002 and 2007.

Saez suggests that this “may … help explain why the dramatic growth in top incomes during the Clinton administration did not generate much public outcry while there has been a great level of attention to top incomes in the press and in the public debate since 2005.”

Inequality and Occupy Wall Street 7: tax policy for occupiers

~ MilesCorak ~ 9 Comments

Perhaps a bit more politely than others in the mainstream media, but nonetheless pretty emphatically, the Ottawa Citizen columnist Joanne Chianello tells Occupiers that it’s time to leave, and she offers some advice:

“I don’t know what the answer is to the growing income gap. Unfortunately, neither do the people at Occupy Ottawa or Occupy Toronto or Occupy Vancouver. They could have contacted a lefty economist (yes, they exist) to help frame specific policy issues or demands, but they didn’t. Perhaps that’s the protest’s “stage two” we keep hearing about.”

Contact a lefty economist!

Well, if economists are going to be at the centre of “stage two” why don’t we forget about “lefty” or “righty”, and just consult the “best”?

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Inequality and Occupy Wall Street 6: tax principles for occupiers

~ MilesCorak ~ 5 Comments

Believe it or not, there is such a thing as a good tax.

A good tax raises the required government revenue by not only treating equals equally, but also by requiring more from those who will be hurt the least.

However, that is not all: a good tax is also a tax that is administered simply, transparently, and in a “neutral” way.

“Neutral” means it does not cause individuals and corporations to behave differently; in other words, the tax respects the outcomes of the marketplace (unless of course prices do not accurately reflect the true costs and benefits of an activity. In this case the tax might be used to explicitly correct these market failures.)

This confronts Occupiers with a dilemma.

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Inequality and Occupy Wall Street 5: decline of the American Dream

~ MilesCorak ~ 11 Comments

There is nothing wrong with inequality … until it starts limiting opportunity.

Well that might be a bit too strongly put, but it is certainly one thing to live in an unequal society where the chances of changing places with the rich, of seeing your children move on and upward, are high. Indeed, if this is the case we may even want a certain degree of inequality: people would have both the incentive and the possibility to better their situation.

But it is another thing altogether to live in an unequal society where there is little chance of moving on, where there are barriers preventing our talents and energies from being rewarded, where the accident of birth determines a child’s life chances.

This type of inequality should worry Occupiers and the 99% because it cuts sharply against what we commonly understand to be the American Dream.

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Inequality and Occupy Wall Street 4: daddy put you in the top 1% !

~ MilesCorak ~ 43 Comments

rupert-and-james-murdoch

It was almost a sad sight to see Rupert Murdoch’s son sitting beside the famed newspaper publisher in the televised committee hearings conducted by the British parliament last July.

James seems so out of depth.

Superstar salary he certainly has, but superstar talent?

If the members of the top 1% are there because of connections or political power—rather than by the force of their talent, energy, and motivation—then we should be rightly critical about claims that they merit their fortunes, and question the contribution they make to economic productivity.

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Inequality and Occupy Wall Street 3: the top 1% are superstars

~ MilesCorak ~ 3 Comments

To explain the fact that the top 1% now take home a larger share of total earnings than they ever have since the 1940s Occupiers need to understand the economics of superstars.

Talent is unique. Or as the late University of Chicago economist Sherwin Rosen stated, “hearing a succession of mediocre singers does not add up to a single outstanding performance.” When he was at his best there was only one Wayne Gretzky, and I guess that is why they nicknamed him “the Great One.” To those of us listening to the opera, or watching the hockey game, the superstar is one-of-a-kind. And because there are no substitutes they get paid much more than even the second best.

This only explains that there is a top 1%, and that as the most talented they get paid a good deal more than the rest of us. It does not explain what has changed, why have they been taking away a bigger and bigger slice of the pie since about 1980.

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