June 2013

Earnings Growth: Better at the Top

U.S. inequality can be measured two ways – by wealth or by earnings. Either way, most working Americans are losing out.

It’s the 1920s again for the richest 1 percent of Americans, and a recent analysis of the wealth gap illustrates why they’re able to live like the fictional Jay Gatsby, portrayed by Leonardo DiCaprio in the new movie, “The Great Gatsby.”

The value of their wealth rises and falls with the stock market. But since the 1960s, they have consistently held 33 percent to 39 percent of the wealth owned by all Americans, including their stock, mansions, commercial real estate, and businesses, according to economist Edward Wolff at New York University. In 2010, the last year examined by Wolff, the richest 1 percent’s share was 35 percent – that was before the Dow flew past 15,000.

The U.S. wealth gap is enormous, partly because most Americans have little wealth to speak of. Most people instead gauge their financial well-being by the size of their paychecks, and income inequality is rising sharply.

Between 1993 and 2011, the earnings of the top 1 percent of U.S. earners grew by nearly 58 percent, after adjusting for inflation. Earnings include salaries, bonuses, stock options, dividends, and capital gains on stock portfolios. That far outpaced the 6 percent rise for the rest of U.S. workers during the same 18-year period, according to a new analysis by economist Emmanuel Saez at the University of California, Berkeley. …Learn More

12