Sunday, October 30, 2011

Are Top Incomes Risky?

On Wednesday Greg Mankiw, a professor of economics at Harvard published a post on his blog entitled “The Rich Get Poorer.” In it he explained how in 2008 and 2009 the incomes of the top one-percent of Americans dropped more as a percentage than the median income, and concluded that the well-to-do’s earnings are exceptionally risky.
He also subtly ridiculed the ‘Occupy Wall Street crowd’ for not recognizing this data.
But a discussion of income trends and their volatility should examine a wider window. Fortunately, also on Wednesday, another member of my blog list commented about the movement amongst various income brackets. In"Why Has Income Gone Up So Much For The Top 1 Percent?” Planet Money fills in the data for the 28 years before 2008. Here they illustrate how ‘real after tax income’ increased about 275 percent for workers at the top.
And for those in the 'Occupy Wall Street crowd' whose incomes are in the bottom fifth?
Over a period of unprecedented expansion in the US economy, they saw their real earnings go up 18 percentage points, or less than one-fifteenth the increase experienced by those at the pinnacle of all salaries.

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