Where Has All the Growth Gone?

http://inequality.org/growth/

Salvatore Babones
June 27, 2012

We all know that the recession has hit families hard, but even mainstream newspapers and magazines have finally caught onto the fact that American household incomes have been stagnant for decades. The Federal Reserve recently reported that the median household income has fallen more than 6% since 2001 (adjusted for inflation). And yet … the economy has grown most of that time.

In fact, were American national income in 2010 distributed to people and households in the same proportions as it was in 2001, the median household income would now be 6% higher than in 2001, not 6% lower. In other words, there’s been enough growth to compensate for the rising number of households, and then some. If the realonomy grew with the economy, we’d all be fine.

Where has all the money gone? Again the answer is no surprise. It’s gone to the very rich. Not the merely rich. The very rich.

Even the merely rich have seen stagnant or declining incomes since the turn of the century. Federal Reserve data show that the 10% of households in America are actually slightly poorer than they were ten years ago. Even the top 1% have seen only minor gains since 2001. For real income growth, you have to look to the top 0.1% or 0.01%.

There the gains have been substantial. The incomes of the top 0.01% don’t show up in surveys, but they do show up in tax data. The World Top Incomes Database (WTID) uses IRS data to compute average real incomes for tax-filing households. Figures are available for all households, the top 10 percent, the top 1 percent, and even the top 0.01% of households.

These data show that for the top 0.01 percent of tax filing households — that’s the top 1 in 10,000 — incomes rose an average of 29% between 2001 and 2010. These households account for just 30,000 of so people. It’s these lucky 30,000 who’ve garnered nearly all of the growth in the US economy over the past ten years.

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