As we have discussed, from 1979 to 2007, inflation-adjusted incomes of the top 1 percent of households increased significantly versus the rest of the wage earners (i.e., the remaining 99%). Those even better off, the top 0.1 percent (the top one one-thousandth of households), saw their incomes grow 390%.

In contrast, incomes for the bottom 90 percent grew just 5 percent between 1979 and 2007. All of that income growth, however, occurred in the unusually strong growth period from 1997 to 2000, which was followed by a fall in income from 2000 to 2007.

Is this wealth concentration a global phenomena, or is it a US centric? Lets go to the global data, via Credit Suisse Research Institute’s Global Wealth Databook:

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Source: Credit Suisse, Research Institute

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And as a reminder, here is the recent growth in the US data, via EPI:

Source: Economic Policy Institute

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UPDATE: November 1 2011 12:51pm

David Wilson of Bloomberg News points out that a rising Misery Indexes worsens the  income-gap effect:

Accelerating inflation and historically high unemployment are magnifying the economic effects of income inequality, according to Sean Darby, a global equity strategist at Jefferies & Co.

The U.S. misery index, which increased in September to its highest level since May 1983. The indicator is calculated by adding the 12-month percentage change in the consumer price index to the jobless rate, as compiled by the Labor Department.

Darby cited the gauge and its U.K. version in a report yesterday. In September, the U.K.’s index rose to its highest reading since March 1992 after more than doubling in the last two years.

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Category: Employment, Wages & Income

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

20 Responses to “Global Wealth Distribution”

  1. csainvestor says:

    and this is using bogus CPI as a gauge for inflation.

    If you believe shadowstats, real inflation is double what has been reported.
    Even if we split the difference, and say real inflation is 25% to 50% higher than has been officially reported- the bottom 99% either has negative income growth, or its barely in positive territory over the last 30 years or so.

  2. Livermore Shimervore says:

    I would like to see a Pyramid of which Fortune 500 companies contributed most to lifting the average income. And yet another chart that shows which companies grew the most but did nothing to lift their U.S. employees wages, despite their increased productivity in the 2000′s.

    U.S. consumers need to start understanding that discussion of jobs should be a knee-jerk invitation to start talking about the POTUS or Congress but should immediately provoke a conversation about which companies they are supporting who in turn do nothing to support the U.S. worker. If you examine $500 spent today (mostly going to Apple, Samsung, Toyota, Wal-Mart) I think you would be surprised how little of that ends up in the hands of those who have any interest in raising U.S. wages. Our consumer priorities are delivering good on a job-less recovery.

  3. csainvestor says:

    Virtually every single Fortune 500 company off-shored millions of decent paying middle class jobs.

    the executive class, fired the middle class, then they took the difference in pay between the former worker in Indiana and the current worker in Calcutta, then they proceeded pocketed the difference.

    this is why the executive class in the 1% has seen their incomes rise 200%.

  4. thales says:

    If you compare households to individuals you are liable to get a spurious conclusion because a change in the composition of households can result in as large a change as a change in income of individuals. In your opening paragraph you compared individuals to households. That is an apples to oranges comparison. Wage-earners are individuals, not households.

    http://politicalcalculations.blogspot.com/2011/10/real-story-behind-rising-us-income.html

    It is also worth serious consideration that the top 1% today are not necessarily the same people as the top 1% ten years ago.

    Please examine this and think some more.

    ~~~

    BR: The Gini Coefficient is a derivative, 2X removed from actual income comparisons. It is a by product of the Lorenz Curve, and is by design geared to look at the overall proportionality of income distribution in a society. This includes various deciles or finer of income distribution.

    By its very design, it will not display the wage distribution of the top 1% or 0.1% particularly well.

    The data is unequivocal, and your tortured 2 times removed curve failing to show that tells me more about you then it does about income disparities.

    Sorry, but this is a MATHFAIL

  5. willid3 says:

    the top 1% not only exported jobs, they also took income from the 99%. and they also took their retirement. the funding problems that so many corporation had with pensions? was because they had trouble funding the executive pensions. not the employee ones. that they had actually put money into in a few years. but which did they get rid of? the employee one of course. even though it did add to profits to companies. but have to get the correct perspective. gotta fund the executive one. first

  6. rd says:

    At least we have less of a financial focus than South Africa.

  7. thales says:

    BR,

    Yes, the Gini coefficient is designed to measure the overall inequality of a distribution, whether of individual or household incomes. By its nature it is not linear. Are you trying to say that it will not reflect the distribution within the top 1%? It was clearly not designed to do that. Or are you trying to say that if all the income in the country were concentrated in the top 0.1%, or even in one individual, the Gini coefficient would not reflect that? It will.

    The point of my comment and link is certainly not that there is no income inequality, nor that it has not changed over time. The point that is that the income distribution for households and families has changed significantly, while that for individuals has not.

    The chart from EPI entitled “Incomes Rising Fastest at the Top”, which is what I presume you call unequivocal, refers to households, not individuals. And the changes in income it displays are also reflected in the Gini coefficient for households.

    The Gini coefficient for individuals has actually decreased slightly, while that for households has increased. That would suggest that the noted rise in top household incomes may be due to changes in household composition rather than changes in individual income. Although the data may be unequivocal, the conclusion may not be.

    In other words, it is not clear that the changes you noted are due to rich individuals getting richer. They could be, with better logic, be imputed to rich individuals combining into households more over time. Or possibly, poor households increasingly breaking up into individuals. Or both. Given that, I would hesitate to jump to any conclusion based on this. Do you have more data on distribution of individual income?

    By the way, what does that “tortured 2 times removed curve” tell you about me?

    ~~~

    BR: What I am saying is you used the wrong tool because it showed the false outcome you desired.

    Your cognitive dissonance is getting the best of you

  8. thales says:

    “BR: What I am saying is you used the wrong tool because it showed the false outcome you desired.
    Your cognitive dissonance is getting the best of you”

    Would you care to be more precise about how the tool is wrong and what false outcome I desired? And if you could address the specific points I made, that would be nice too.

    ~~~

    BR: The tool in question was the Gini Co-efficient you referenced at Politicial Calculations. It is a derived from an income distribution along a curve, on a scale of 0-1. It is not configured to compare data such as top 1% versus bottom 99%, but rather the entire populations or to show significant changes over time.

    The link you referenced also claims “there has been absolutely no significant change in the level of inequality among U.S. individual income earners from 1994 through 2010″ which the CBO chart along with this chart show is utter nonsense.

  9. Jim67545 says:

    The accelleration I think is due to the savings rate. Low and moderate income families save little, need to spend nearly 100% of what they make and the statistics of what they have saved for retirement – or an unexpected emergency, is pitiful. Those earning high 6 or 7 figure incomes hardly spend 100% of their after tax earnings which leads to accumulation of net worth, yet more investment income and income from actively managed assets, etc. It spirals upward as noted, unless the rate of taxation is high enough to dampen the effect (which it has not been.)

    The Thales speculation that the effect might be “poor households increasingly breaking up into individuals” is intriguing. The proliferation of female headed households (married, never married) with children may reflect this.

  10. The misery index is also highly correlated to fortunes (misfortunes) of incumbents in Federal elections. As such, prospects for Obama & Democrat Senate are dim should the electorate be presented with “adequate” alternatives.

  11. thales says:

    “The link you referenced also claims “there has been absolutely no significant change in the level of inequality among U.S. individual income earners from 1994 through 2010″ which the CBO chart along with this chart show is utter nonsense.”

    BR, both of those charts, again, refer to HOUSEHOLD, NOT INDIVIDUAL, income. They’re different. As I pointed out, and which you have not addressed, the changes in household income are as likely to be due to changes in household composition as to changes in income.

    If the Gini coefficient time series is so inadequate in measuring income disparity, why does it reflect the changes in HOUSEHOLD income that you called out, but not changes in INDIVIDUAL income? And why do you seem reluctant to address that point.

    Also, what was the false outcome I desired?

  12. thales says:

    “The purpose of studying economics is not to acquire a set of ready-made answers to economic questions, but to learn how to avoid being deceived by economists.” -Joan Robinson

    BR- “The tool in question was the Gini Co-efficient you referenced at Politicial Calculations. It is a derived from an income distribution along a curve, on a scale of 0-1. It is not configured to compare data such as top 1% versus bottom 99%, but rather the entire populations or to show significant changes over time.”

    Would not the entire population be composed or the top 1% plus the bottom 99%? Are we not seeking to find significant changes over time? I agree that the Gini coefficient is not designed specifically to compare the top 1% to the bottom 99% precisely as you have framed it, but that has never been the point of my comment. The point was individual income vs. household income distribution, and how changes in income distribution over time are not necessarily due to changes in individual income over time.

  13. algernon says:

    Barry, you are dead wrong. INDIVIDUALS! You are presenting data on households. It is very interesting that there is such a difference. The Gini co-efficient for individuals in from the US Census. Deserves more than the slipshod back of your hand.

  14. victor says:

    “Behind every great fortune there is a great crime”, Honore de Balzac. How do you backstop the acceleration? Devise a taxation system that somehow does the trick without blunting the incentives to create wealth? If we could have wage controls why not overall income/wealth control via smart taxation? But the rich have always been one step ahead of these systems. Grow the economies so that most boats get lifted out of the mudflats by the rising tide? What would be an acceptable income/wealth distribution ? How’s this: Few poor (5%), a big, prosperous middle class (90%), few rich (5%) and no ultra rich (0%)? Keep dreaming.

  15. Auntiegrav says:

    The concept of Rich vs. Poor is dandy, but it assumes that there are resources to back up the redistribution of wealth that shouldn’t have been imagined into existence in the first place. Wealth accumulation is really the denial of resources to others in some way or another. Comparing tax rates on people fails to understand the problem, which is one of money replacing value.
    Real value is determined by the usefulness of resources and people IN THE FUTURE. The only way for resources to make it into the future is to NOT USE THEM. That means that people have to find ways to service their own needs AND the needs of their place in the universe without consuming that place.
    Money detaches people from their place and from each other, allowing decisions to be made based only on arbitrary prices (not actual value to the future).

    Tax the money, not the people. All financial purchases and transactions should be taxed enough to establish sustainability. The “middle class” does not exist: there are those who have to work to eat and those who will never have to work again. Stop allowing the delusion of nobility and the delusion of “progress” based on money to keep you from actually thinking about where things come from and what people actually need.

  16. LiberTea says:

    Is it fair to compare nominal dollar wealth between citizens in developed nations with developing nations without considering purchasing power parity?

    An Indian worker might make $1.97/day, but can also LIVE on $1.97/day,
    which would hardly be possible in the US of A.

  17. thales says:

    Hi BR;

    Although I’m not wild about flogging a dead horse in a thread that’s going stale, I have a hunch that there are still some readers, even very intelligent ones with good math skills, that don’t quite get the idea here. So I’ll illustrate how misleading it is to expect household income to accurately reflect individual income with a very simplified model. This is a tiny bit laborious, so if you know it, please feel free to skip it. If you don’t know this, please bear with me.

    Suppose we had a population of five people. Two of them are young professionals, living separately, each with an income of $100,000. Their average individual income is equal to their average household income, $100,000. Now suppose they get married to each other. Now there is one household with an income of $200,000 so, of course, their average household income has changed to $200,000 and their average individual income is unchanged at $100,000.

    The other part of the population is in one household; Ma and Pa, with an income of $45,000 each, and Junior, a teenager, with an income of zero. Their average household income is $90,000 and their average individual income is $30,000.

    Now suppose Junior moves out and fortunately finds a good job that pays $45,000. Now there are two households with an average household income of $67,500. That’s a decrease, even though the total income for the three people has increased by 50%. The average individual income for the three has also increased by 50% to $45,000.

    Now suppose that Ma and Pa get divorced and Pa moves out, but they keep their same incomes. Now the average individual income for the three is unchanged at $45,000, but the average household income decreases to $45,000, a decrease of one third, with no change in actual total income.

    If we now consider all the individuals as one population, we see that the total income has changed from $290,000 to $335,000. The average individual income of the whole population has increased from $58,000 to $67,000. But the average household income has decreased from $96,667 to $83,750.

    The average individual income of the top 40% of the population has not changed, at $100,000, but their average household income has doubled to $200,000, even though their overall prosperity has not increased a bit. The average individual income of the lower 60% of the population has increased by 50%, from $30,000 to $45,000, but their average household income has been cut in half, from $90,000 to $45,000 even though they are overall more prosperous.

    This is what I mean when I say that a change in the composition of households can outweigh income changes in this kind of statistics.

  18. jlj says:

    Would be nice to see the graph – Incomes rising fastest at the Top- with one more line for congressional salaries. Went from $60K in 1980 to $174K now.