A Note on the Distribution of Income in the United States
Over the last 40 years, the Gini coefficient for disposable income in the United States has increased almost constantly. A (Republican) Princeton economist and member of the President's Council of Economic Advisers (a tax policy expert btw) pointed this out to me in the OEOB in 1991. The US Gini coefficient went from approximately 39 in 1968 to 47 in 2006. No other industrialized democracy (Japan/Western Europe) has a Gini coefficient above 35 - most have coefficients in the low 30s.
To put this in different terms, in 1968, the top quintile of households earned 43% of income in the United States; by 2001, the top quintiles earned 50.1% of income.
Now one might say, well, that is just the natural order of things. But that would have to suppose that the top quintile has become smarter, more skilled, better able comparitively speaking, than the other 4 quintiles, and enough so that they now "merit" about 1/6 more per capita of the country's income than 40 years before. Not bloody likely.
There are other similar measures. In 1950, the top 5% of earners earned about 50% more than those at the 80th percentile and about double those at the 60th percentile. In 1970, those at the 95th percentile earned a bit more than 56% more than those at the 80th percentile and a about 114% more than those at the 60th percentile. In 2007, those at the 95th percentile earned about 75% more than those at the 80th percentile and 162% more than those at the 60th percentile. (Holy expanding Gini coefficient boy wonder - it's not just magic!!) All these figures are in constant dollars (2007). Indeed, those at the 80th percentile in 2007 were just at or below the level that those at the 95th percentile had attained in 1970, 38 years before. Those at the 60th percentile were still BELOW where those at the 95th percentile were in 1960, 50 years earlier.
The example in this post is almost laughable. Don't cry for me Argentina!! For chrissakes. Some people are just .... not trained to look at facts in the way their postgraduate degrees should have taught them. To have a household income of $400K, one is well, well beyond the 95th percentile. Indeed, if one's after-tax household income is $200K, one is collecting after tax more than those at the 95th percentile collect before tax.
The IRS reports that the greatest increases in household income have occurred in the top percentile. (The top 1%.) From 1977 to 1994, after tax income for the bottom 3 quintiles all declined. It rose by 4% for the 4th quintile. It rose by 9% for the 9th decile (those in the bottom of the top quintile). It rose by a whopping 25% for those in the bottom 4% of the top 5%, and increased by 72 fricking percent (yep boys - that's right, after tax) for those in the top percentile. The figures AFTER TAX (mind you) are starker from 1979 to 2004.
One of my friends, who posts here regularly, is fond of noting how much tax the top 1% pays. Yep, buster, that's because from 1979 to 2004, the bottom of 60% of earners by household in America have increased their annual after tax incomes by a WHOPPING 56 basis points a year - god help us they might drive an extra 5 miles on their next vacation. The top 1% has increased its after-tax income at 8 times that rate, which with compounding, represents a substantial relative gain. (The trend was in the opposite direction from 1928 to 1970.)
In fact, the greatest determinant of income, education, has moved in the other direction decisively. In 1940, only 25% of Americans had a high school degree; in 1970, the figure was just over 50% (52.3%), and by 2000, the figure had climbed to 80%. (There is almost one-to-one link between education and income....)
Similar changes occurred in those holding at least a bachelors degree. In 1940, less than 5% of Americans held one; in 1970, it was about 11%; in 2000, it was just under 25%.
Another explanation is that the structure of the economy has become such that the top quintile is better able to capture that income.
I am watching Johnny Depp, who is great in the movies Pirates of the Carribean. This is a great series of movies. Seldom are sequels so good and the acting is brilliant.
Over the last 40 years, the Gini coefficient for disposable income in the United States has increased almost constantly. A (Republican) Princeton economist and member of the President's Council of Economic Advisers (a tax policy expert btw) pointed this out to me in the OEOB in 1991. The US Gini coefficient went from approximately 39 in 1968 to 47 in 2006. No other industrialized democracy (Japan/Western Europe) has a Gini coefficient above 35 - most have coefficients in the low 30s.
To put this in different terms, in 1968, the top quintile of households earned 43% of income in the United States; by 2001, the top quintiles earned 50.1% of income.
Now one might say, well, that is just the natural order of things. But that would have to suppose that the top quintile has become smarter, more skilled, better able comparitively speaking, than the other 4 quintiles, and enough so that they now "merit" about 1/6 more per capita of the country's income than 40 years before. Not bloody likely.
There are other similar measures. In 1950, the top 5% of earners earned about 50% more than those at the 80th percentile and about double those at the 60th percentile. In 1970, those at the 95th percentile earned a bit more than 56% more than those at the 80th percentile and a about 114% more than those at the 60th percentile. In 2007, those at the 95th percentile earned about 75% more than those at the 80th percentile and 162% more than those at the 60th percentile. (Holy expanding Gini coefficient boy wonder - it's not just magic!!) All these figures are in constant dollars (2007). Indeed, those at the 80th percentile in 2007 were just at or below the level that those at the 95th percentile had attained in 1970, 38 years before. Those at the 60th percentile were still BELOW where those at the 95th percentile were in 1960, 50 years earlier.
The example in this post is almost laughable. Don't cry for me Argentina!! For chrissakes. Some people are just .... not trained to look at facts in the way their postgraduate degrees should have taught them. To have a household income of $400K, one is well, well beyond the 95th percentile. Indeed, if one's after-tax household income is $200K, one is collecting after tax more than those at the 95th percentile collect before tax.
The IRS reports that the greatest increases in household income have occurred in the top percentile. (The top 1%.) From 1977 to 1994, after tax income for the bottom 3 quintiles all declined. It rose by 4% for the 4th quintile. It rose by 9% for the 9th decile (those in the bottom of the top quintile). It rose by a whopping 25% for those in the bottom 4% of the top 5%, and increased by 72 fricking percent (yep boys - that's right, after tax) for those in the top percentile. The figures AFTER TAX (mind you) are starker from 1979 to 2004.
One of my friends, who posts here regularly, is fond of noting how much tax the top 1% pays. Yep, buster, that's because from 1979 to 2004, the bottom of 60% of earners by household in America have increased their annual after tax incomes by a WHOPPING 56 basis points a year - god help us they might drive an extra 5 miles on their next vacation. The top 1% has increased its after-tax income at 8 times that rate, which with compounding, represents a substantial relative gain. (The trend was in the opposite direction from 1928 to 1970.)
In fact, the greatest determinant of income, education, has moved in the other direction decisively. In 1940, only 25% of Americans had a high school degree; in 1970, the figure was just over 50% (52.3%), and by 2000, the figure had climbed to 80%. (There is almost one-to-one link between education and income....)
Similar changes occurred in those holding at least a bachelors degree. In 1940, less than 5% of Americans held one; in 1970, it was about 11%; in 2000, it was just under 25%.
Another explanation is that the structure of the economy has become such that the top quintile is better able to capture that income.
I am watching Johnny Depp, who is great in the movies Pirates of the Carribean. This is a great series of movies. Seldom are sequels so good and the acting is brilliant.
milosweet:
Love that movie