During the economic recovery in the years 2009 to 2011, the richest Americans captured all of the economy’s income gains—and then some, new research shows.
A recent study by UC-Berkeley economist Emmanuel Saez, a prize-winning economist specializing in income inequality and a proponent of steeper taxes on the rich, found that the top 1% of income earners captured 121% of income gains in the recovery’s first years.
The reason these richest Americans captured more than 100% is because their inflation-adjusted income growth was 11.2% while that of the bottom 99% was negative 0.4%.
While the richest Americans took a beating, seeing a 36.3% decline in income during the Great Recession years of 2007-2009 (compared with an 11.6% decline for the 99%), the trend over the past two decades has been for the income of the top 1% to grow substantially while the income of the bottom 99% stagnates.
From 1993 to 2011, real income growth averaged 13.1%, but Saez’s research indicates that incomes of the top 1% captured 57.5% of that growth while the bottom 99% experienced inflation-adjusted growth of just 5.8%
Saez’s paper mainly reports the numbers, and does not wade far into policy implications, except to suggest that the retreat of New Deal-era institutions—“progressive tax policies, powerful unions, corporate provision of health and retirement benefits, and changing social norms regarding pay inequality”—may explain the widening income gap.