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    The One Percent Captured All the Wealth in the Post-Recession Recovery

    Written by

    Derek Mead


    Here's what the new economy looks like: As firms have replaced workers with robots and eliminated them altogether to climb out of the Great Recession, the entirety of pre-tax wage growth during the recovery from 2009-2011 went to the top one percent of earners. In fact, it was even more than that; because the rest of earners saw their wages decline during that period (i.e. they were still stuck in the recession), the top one percent captured a whopping 121 percent of wage increases during the so-called recovery.

    That's according to a study (PDF) by Emmanuel Saez at the University of California, which he recently updated to reflect the 2011 statistics. (The results are based on IRS data, so there's a lag period; 2012 wages won't be available until people file in 2013.) The top one percent captured more than 100 percent of total wage growth because the rest of the country saw wages decrease by 0.4 percent. In other words, only the super-rich saw any sort of recovery during that period.

    The results show that while the top-level rich were hit hardest by the recession, they've made up for it while the rest have stagnated. That means that, from 1993-2011, 62 percent of total wage growth in the country went to just the top one percent. Saez predicts that this concentration of wealth at the top is unlikely to change:

    Looking further ahead, based on the US historical record, falls in income concentration due to economic downturns are temporary unless drastic regulation and tax policy changes are implemented and prevent income concentration from bouncing back. Such policy changes took place after the Great Depression during the New Deal and permanently reduced income concentration until the 1970s. In contrast, recent downturns, such as the 2001 recession, lead to only very temporary drops in income concentration .

    The policy changes that are taking place coming out of the Great Recession (financial regulation and top tax rate increase in 2013) are not negligible but they are modest relative to the policy changes that took place coming out of the Great Depression. Therefore, it seems unlikely that US income concentration will fall much in the coming years. 

    Saez illustrates the point with figures mapping historical income trends. The first shows the income share of the top 10 percent of earners with and without capital gains. As you can see in the last 10 years, the dot-com bust hurt investment income, which rebounded before the mortgage crisis, and which is rebounding again. Saez expects that once data are available for 2012, it will show a boost in capital gains as 2012 was a bullish year. (He also notes that 2012 was probably a better year for the 99 percent, but not to the same degree.)

    Image via Saez's paper

    The next figure breaks things down within the top 10 percent. As you can see, while all earners in the top 10 percent have accrued a higher proportion of the country's wealth, that share has boomed for the top one percent in the last 20 years, and is swinging back upwards again.


    Image via Saez's paper

    The point is that when President Obama spends a vast portion of his State of the Union address tonight talking about how the middle class needs help, the only people who were truly helped by the early stimulus packages following the recession were the folks at the very top. Timothy Noah at the New Republic notes that is a break from historical partisan trends–essentially, that concentration of wealth is historically normal for Republican presidencies, not Democratic ones.

    Now, Congress deserves its own share of the blame here, as the past four years have been pure gridlock. But either way, it's important to note that for all the lip service paid to the middle class, it's the loftiest reaches of the upper class that's feeling the boom.