Hold the condolence cards, but the recession cost the rich. The share of income received by the top 1% ? that potent symbol of inequality ? dropped to 17% in 2009 from 23% in 2007, according to federal tax data. Within the group, average income fell to $957,000 in 2009 from $1.4 million in 2007.
Analysts say the drop largely reflects the stock market plunge, and most think top incomes recovered somewhat in 2010, as Wall Street rebounded and corporate profits grew. Still, the drop alters a figure often emphasised by inequality critics, and it has gone largely unnoticed outside the blogosphere.
By focusing on the top 1%, the Occupy Wall Street movement has made economic fairness a subject of street protest and political debate. ?It?s very interesting that this has become such a big topic now when the numbers are back to where they were in the 1990s,? said Steven Kaplan, an economist at the University of Chicago?s business school. ?People didn?t seem to be complaining about it then.?
In 2009 the average income of the top 1%, adjusted for inflation, fell below its 1998 level, but remained well above where it was in 1990: $6,62,000. While the protests follow the worst downturn since the Great Depression, inequality has been growing for three decades, driven by economic and political forces. Globalisation created larger markets for those with scarce talents but hurt less educated workers by pitting them against cheap foreign labour. New technology also hurt unskilled workers, by replacing many with machines.
Unions declined, eroding blue-collar bargaining power. The financial industry grew, with paydays heavily weighted toward the top. Corporate culture accepted the growing gap between the executive suite and the factory floor. Falling tax rates on the highest earners added to the net income divide, by allowing top earners to keep more of their pay and increasing their incentive to maximise it.
In the decades after World War II, by contrast, the average income of the top 1% grew only marginally faster than inflation and significantly slower than middle-class incomes. That combination caused inequality to decline throughout much of the 1950, ?60s and early ?70s.
As recently as 1980, only about one-tenth of the nation?s pretax income went to the top 1%. By 2000, that share had grown to about 22%. It slumped to about 18% in 2003, after a market crash, only to rebound by 2007 to levels not achieved since the Roaring ?20s.
Kaplan argues the Occupy protesters have accused the wrong villain by focusing on inequality, which he called an inevitable byproduct of growth. ?If you want to reduce inequality, all you need to do is put the economy in a recession,? he said.
But Harry J Holzer, an economist at Georgetown University, says much of the recent growth at the top reflects insider privilege instead of real productivity. ?The notion that the really high earners are earning it has become very questionable,? he said. ?Look at the outrageousness of the damage they imposed on the rest of the economy and the cost being borne by middle-income Americans.?