Are the rich really getting richer? Thats a pretty standard line from the Left, a lament usually cited in the course of calling for higher tax rates. Robert Reich is particularly fond of this mode of attack: A recent post of his was headlined, For 70 years, the wealthy have grown wealthier. Professor Reich probably doesnt write his own headlines, but its a common enough sentiment for him, and his prose is rich with phrases such as the super-rich got even wealthier this year.
He isnt alone in employing this mode. Take this from an April 7
Salon article: And surely the rich dont
need that 25 percent top rate in the way poor folks need programs like TANF and seniors need Medicare about 90 percent of all American
income gains since the 1970s have gone to the top 10 percent of earners.
This is not true.
The numbers generally cited in support of this argument do not actually tell us much about what has happened to the incomes of wealthy households over time. Thats because the people who are in the top bracket today are not the people who were in the top bracket last year. Theres a good deal of socioeconomic mobility in the United States more than youd think. Our dear, dear friends at the IRS keep track of actual households (boy, do they ever!), and sometimes the Treasury
publishes data about what has happened to them. For instance, among those who in 1996 were in the very highest income group isolated for study the top 0.01 percent 75 percent were in a lower income group by 2005. The median real income of super-rich households went
down, not up. The rich got poorer. Among actual households, income grew proportionally more for those who started off in the low-income groups than those that began in high-income groups.
That wasnt even an unusually good decade in terms of mobility. During the horrible, horrible Reagan years, as
National Review noted back in 1991, the average income growth for actual households in the lowest income bracket was 77 percent over the course of a decade; income growth for actual households in the top group was only 5 percent during those same years. Of those who were in the poorest fifth in 1979, 85.8 percent had moved to a higher bracket by 1988, and 14.7 percent of them moved to the top bracket which is to say, the poor of 1979 were more likely to be the rich of 1988 than to be the poor of 1988. The poor got richer, and some of them got a lot richer. Reagans record has not been matched Ronald Reagan was the champion of the poor, as it turns out but economic mobility has been pretty stable for the past 20 years: About 50 percent of U.S. households move from one income group to a different one every decade, and actual households initially in the low-income groups see proportionally
more income growth than do actual households initially in the high-income groups.
When somebody says that that top 1 percent saw its income go up by X in the last decade, they are not really talking about what happened to actual households in the top 1 percent. Rather, they are talking about how much money one has to make to qualify for the top 1 percent. All that really means is that the 3 million highest-paid Americans in 2010 made more money than did the 3 million highest-paid Americans in 2000, the 100,000 highest-paid Americans this year made more money than did the 100,000 highest-paid Americans made in 2000, that the 50,000 highest-paid Americans made more money this year than did the 50,000 highest-paid Americans made in 2000, that the 1,000 highest-paid Americans this year made more money than did the 1,000 highest-paid Americans made in 2000, etc., which is not shocking. But, as the Treasury data show:
They are not the same people.
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