The One Percent gets One Percentier: Income inequality at highest level since World War I
By Mike Andrew
Not feeling the so-called “economic recovery”? No wonder! You wouldn’t unless you’re a corporate CEO, a hedge fund manager, or an investment banker.
New research by an economist at UC Berkeley shows that the incomes of the richest Americans have bounced back from the crash of 2008, while those of working people haven’t even started to rebound.
According to a study titled “Striking it Richer: The Evolution of Top Incomes in the United States” by Emmanuel Saez, the income inequality gap has been expanding, rather than narrowing, as the 2007-2009 recession recedes.
In fact, that trend has been unfolding for more than 30 years, with the highest earners only temporarily set back by the most recent downturn.
Let’s look at the numbers.
During the first years of the “recovery,” 2009-2012, the top One Percent saw their income jump 31.4%, while the bottom 99% saw their incomes grow by only 0.4%. In other words, the One Percenters took 95% of the total income gain.
In 2012, the richest 10% of Americans got more than half of all the income generated by the economy – 50.5% – the largest share since record-keeping started in 1917.
It gets worse. According to the US Bureau of Labor Statistics, wages fell at the fastest rate ever recorded during the first quarter of 2013.
Hourly wages fell 3.8% in the first quarter, the biggest drop since the Bureau began tracking wages in 1947.
In fact, real wages have now declined for the 40th consecutive year! According to the 2013 Economic Report to the President, wages adjusted for inflation reached their peak in 1972, and it’s been down hill ever since.
Income for the One Percenters has soared by 275% over the past 30 years, while the rest of us have lost ground.
“This decline is especially amazing when we consider that private non-farm productivity has doubled in this period,” according to Kenneth Thomas, who blogs under the name “Middle Class Economist.”
The result is that what economists call “labor unit costs” fell 4.3%. In plain English, that means that paychecks shrank, but work output grew.
“If you’ve been paying attention,” Thomas explains, “you know the drill: higher productivity + lower wages = greater inequality.”
Some people might say this is the result of “market forces” working themselves out, but according to the Economic Policy Institute (EPI), that is just not the case. In fact, a large part of the widening gulf between rich and poor has been due to tax and budget policies that redistribute wealth upwards, favoring the already rich at the expense of working families.
In addition, the boost in income for the One Percenters and the real cream of the crop – the top one-tenth of one percent – is correlated with tax cuts, the EPI study found.
Corporations are also able to shield a large part of their income from any US taxes at all by moving the money offshore.
The largest US-based companies expanded their stockpiles of untaxed offshore capital by $183 billion in 2012, increasing such holdings by 14.4%, according to data compiled by Bloomberg.
Microsoft, Apple, and Google each added to their offshore holdings by more than 34% in 2012. Combined, those three companies alone plan to keep $134.5 billion outside the US government’s reach, more than double the $59.3 billion they held back only two years earlier.
A Wall Street Journal analysis of 60 big US companies found that, together, they moved a total of $166 billion offshore in the last year alone. That shielded more than 40% of their annual profits from US taxes, and also from their own shareholders, since it left the money off-limits for paying dividends, buying back shares, or making new investments in the US.
Fed up yet?