Top earners see extensive income gains compared to bottom 99 percent, report says

Emmanuel Saez (center), a UC Berkeley economics professor and winner of the prestigious John Bates Clark Medal authored the report showing uneven rates of recovery following the 2008 recession between the two financially disparate groups.
Evan Walbridge/File
Emmanuel Saez (center), a UC Berkeley economics professor and winner of the prestigious John Bates Clark Medal authored the report showing uneven rates of recovery following the 2008 recession between the two financially disparate groups.

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According to a report released last month by the UC Berkeley department of economics, the top 1 percent of earners have made immense income gains while incomes of the bottom 99 percent have stagnated and declined.

Written by Emmanuel Saez, a UC Berkeley economics professor and winner of the prestigious John Bates Clark Medal, the report showed uneven rates of recovery following the 2008 recession between the two financially disparate groups.

According to the report, the top 1 percent of incomes grew 11.2 percent from 2009 to 2011, while those of the bottom 99 percent shrank by 0.4 percent over the same period. Saez reported that the top percentage made 121 percent of income gains after the recession.

“In my opinion, the numbers are ambiguous,” said Russell Roberts, a research fellow at Stanford University’s Hoover Institution. “What Saez captures correctly is that the richest people in the United States are richer than they used to be. The question is why.”

Roberts explained that the ability to leverage talent is much greater today than it was in the past, as modern technology allows for wider audiences to be reached. He said that the disproportionate trend of large income increases did not necessarily detract from the total share of wealth and could actually encourage ingenuity.

Referring to innovators like Steve Jobs, Roberts remarked, “I don’t resent that they’re fabulously wealthy, because they’ve made the world a better place.“

However, both Roberts and UC Berkeley professor of public policy Robert Reich agreed that the concentration of political privilege resulting from income inequality might threaten American democracy.

“Even though we are becoming more productive, the vast middle class lacks the purchasing power to keep the economy going at or near full employment,” Reich said. “When so much income and wealth is concentrated at the top, political power becomes concentrated there as well.”

In the report, Saez wrote that falls in income concentration due to economic downturns are temporary unless drastic regulation and tax policy changes are implemented.

“The policy changes that are taking place coming out of the Great Recession are not negligible but they are modest relative to the policy changes that took place coming out of the Great Depression,” Saez wrote in the report.

Reich noted that the government is working to reduce income inequality. These include efforts to increase the minimum wage as well as the Affordable Care Act, which will bring health insurance coverage to 20 million previously uncovered citizens, and the Dodd-Frank Act, which regulates financial transactions on Wall Street.

“None of these initiatives are large or bold enough to reverse the trend towards widening inequality,” said Reich. “It seems unlikely that income concentration is going to change very much in coming years.”

Contact Mia Shaw at [email protected].

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  • Jeff Lopes

    Thank god we have the 1%. Who do you think is paying the taxes in the USA. The top 1% pay 40% of the taxes. Did you know that the wealthiest counties in the USA are no longer on Long Island, or California? Guess what…they are now located in Washing DC area, like northern Virginia and southern Maryland.
    Let me put it this way. The stronger the government gets, the poorer we get