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Physicist, Startup Founder, Blogger, Dad

Monday, July 10, 2006

More income inequality

Latest on income inequality (via Economist's View). From 2003-2004 the top 1% gained 17%, while the other 99% of the population barely advanced. So, the fruits of economic growth went overwhelmingly to a small group. The top 1% of earners now account for about 20% of pre-tax earnings. IIRC, the threshold for the top 1% is about $275k per annum.

Economists Thomas Piketty and Emmanuel Saez have recently made available an updated version of their groundbreaking data series on U.S. income inequality.[1] The data are unique because of the detailed information they provide regarding income gains at the top of the income spectrum, and also because they extend back to 1913. By contrast, widely used Census data on income developments do not capture income trends among the top one percent of households and go back only to the end of World War II.

...The Piketty and Saez data offer the first real snapshot of income trends among those at the pinnacle of the income spectrum in 2004. The data show that income gains between 2003 and 2004 were particularly large for those at the very top of the income spectrum, resulting in a nearly unprecedented one-year increase in income concentration.[3] The Piketty and Saez data show:

1) From 2003 to 2004, the average incomes of the bottom 99 percent of households grew by less than 3 percent, after adjusting for inflation.

2) In contrast, the average incomes of the top one percent of households experienced a jump of almost 17 percent, after adjusting for inflation. (Census data show that real median income fell between 2003 and 2004. Average income is pulled up by gains at the top of the income spectrum; the 3 percent rise among the bottom 99 percent seems to largely reflect gains by households in the top quintile of the income spectrum. In contrast, trends in median income capture the experience of households in the middle of the income spectrum.)

3) The top one percent of households garnered 36 percent of the income gains in 2004.

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