The 1% Have Regained Their Recession Losses And Then Some

It's A Great Time To Be Rich

• BY CHRISTOPHER INGRAHAM

• March 18, 2014

The OECD just released the seventh edition of its Society at a Glance report, a data-driven barometer of the economic and social health of its 34 member countries, including the United States. The top-line finding for the United States is that the share of pre-tax income going to the top 1 percent of earners continues to be the highest among OECD countries, standing at 19.3 percent in 2012.

This share has more than doubled since 1980. The economic crisis of 2007-2008 took a small bite out of top income shares, but since then the 1 percent regained its losses and even increased its share of the pie relative to its prerecession high.

No matter how you slice the data, things are great at the top end of the income distribution. The top 10 percent of wage earners are closing in on 50 percent of the pie, while the top 0.1 percent are taking in nearly 10 percent of the income. For some historical context, consider that the 0.1 percent now claim a larger share of income than the 1 percent did in the early '80s, and the 1 percent are now earning nearly as much as the top 5 percent did during the same period. Bear in mind that these figures are exclusive of capital gains – if investment income were included, these shares would be even higher.

The flipside of all this, of course, is that there’s a smaller share of the pie left for everyone else. The OECD finds that relative poverty rate in the United States is 17.4 percent, the fifth-highest among member countries. And while the wealthy may have gained back their recession losses, the poorest have not: The number of Americans reporting instances of not being able to afford enough food for their families has risen by 50 percent since the start of the crisis.

These data raise the question: What share of income should the top 1 percent be taking in? Conventional economic wisdom holds that we should just leave the 1 percent be, since any form of redistribution would put a damper on economic growth. But as the IMF recently found, this isn’t the case. Redistribution can actually provide a net benefit to growth by offsetting the harmful effects of inequality.

Finally, you have to wonder: In the absence of any leadership from national politicians, just how large will the 1 percent's share of the pie grow?