Saturday, August 22, 2009

US Income Inequality Reaches Record Level

According to research done by Emmanuel Saez, a professor of economics at U.C Berkeley, in 2007, the top 10% of income and wage earners got half (49.74%) of all income and the other 90% split the other half.

The previous peak level was 49.29% in 1928, the height of the 1920s stock market bubble.

If capital gains are excluded, we were not quite at the Roaring 20’s levels of inequality, but were close at 45.51% vs. 46.09% in 1928.

The average from the end of WWII through 1980 was 32.3% excluding capital gains and 34.0% including them.

But the disparity began widening in the early 1990s. According to Saez, "The top 1% incomes captured half of the overall economic growth over the period 1993-2007."

And the disparity became especially distorted during the current decade.

"While the bottom 99 percent of incomes grew at a solid pace of 2.7 percent per year from 1993-2000, these incomes grew only 1.3 percent per year from 2002-2007. As a result, in the economic expansion of 2002-2007, the top 1 percent captured two-thirds of income growth," reports Saez.

Even while the stock market surged, employment expanded, and home prices inflated at historic levels, things were not nearly so rosy for the vast majority of U.S. workers.

The full report can found at:

"As in a poker game where the chips were concentrated in fewer and fewer hands, the other fellows could stay in the game only by borrowing. When their credit ran out, the game stopped." -- Marriner S. Eccles (1951), FDR's Fed Chairman, on events leading to the Great Depression

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