Every year, the Social Security Administration lays out exactly how many people earned specific amounts of money in the preceding year. 2009's numbers were just released. Feast away:
|2009 Earnings||Number of Tax Filers||Percentage of Total Tax Filers||Aggregate Earnings (billions)||Percentage of Total Earnings|
Sources: Social Security Administration, author's calculations.
A few observations here:
- The amount earning more than $50 million last year was actually the lowest since 2003. In 2008, 131 people cracked the $50 million mark -- twice as many as in 2009.
- Few people, except for maybe hedge fund managers, actually earn more than $50 million per year. In most cases, incomes more than $50 million are the result of selling assets that were accumulated in the past, with the proceeds counted as taxable income for that year. For example, Bill Gates sells a tremendous amount of Microsoft
shares every year. Same for Larry Ellison of Oracle (Nasdaq: MSFT) , and Larry Page of Google (NYSE: ORCL) . Most of us wouldn't consider these sales "income," but that's how they're accounted for. (Nasdaq: GOOG)
- Income inequality is incredibly strong. The top 1% of earners made about as much as the bottom 48%.
On that last point, inequality, Slate's Timothy Noah recently penned a great 10-part series on income inequality in the United States that puts a lot of these numbers into context. In his words:
It's generally understood that we live in a time of growing income inequality, but "the ordinary person is not really aware of how big it is," [Economist Paul] Krugman told me. During the late 1980s and the late 1990s, the United States experienced two unprecedentedly long periods of sustained economic growth -- the "seven fat years" and the "long boom." Yet from 1980 to 2005, more than 80 percent of total increase in Americans' income went to the top 1 percent. Economic growth was more sluggish in the aughts, but the decade saw productivity increase by about 20 percent. Yet virtually none of the increase translated into wage growth at middle and lower incomes, an outcome that left many economists scratching their heads.
And here's what I think is really important:
Why don't Americans pay more attention to growing income disparity? One reason may be our enduring belief in social mobility. Economic inequality is less troubling if you live in a country where any child, no matter how humble his or her origins, can grow up to be president. In a survey of 27 nations conducted from 1998 to 2001, the country where the highest proportion agreed with the statement "people are rewarded for intelligence and skill" was, of course, the United States. (69 percent). But when it comes to real as opposed to imagined social mobility, surveys find less in the United States than in much of (what we consider) the class-bound Old World. France, Germany, Sweden, Denmark, Spain -- not to mention some newer nations like Canada and Australia -- are all places where your chances of rising from the bottom are better than they are in the land of Horatio Alger's Ragged Dick.
I touched on this last week in an article about who owns the stock market. Income inequality is something to strive for if there's also strong social mobility -- the ability to work hard and move up the income ladder from poor to rich. But social mobility in the U.S. is among the lowest of all developed nations. Rather than just a function of hard work, wealth in the U.S. is largely attributable to family status and upbringing. In the U.S., nearly 50% of someone's earnings can be explained by his or her parents' earnings, compared with less than 20% in Canada, Finland, Norway, Australia, and Denmark, according to OECD. That in itself is a reason to look at our income inequality with a sense of disappointment.
What do you think?