Income Growth for the Rich, Stagnation for the Majority,  

                                                   from 1976 to 2023                      

                    (data and graphs from RealTime Inequality -- Factor Income) 

Since 1976 a shift of 15.4% of all national income share has increased the incomes of the top ten percent of households. (See Realtime Inequality, Income, Factor Income, Households, Share of Total Income.) This shift represents $3.4 trillion that once went to the lower-earning 90%. If the economy were to return to 1976 distribution ratio each and every household of the 117 million households in the lower 90% would see an income gain of about $29,000, and poverty would be eliminated. 

The household at the

20th percentile could earn $57,000, not $28,000

the 40th percentile could earn $84,000, not $55,000 

The median household income would be around $100,000, not $71,000

the 60th could earn $119K, not $90K 

the 80th could earn $178K, not $149K.                        --- I got the household income percentiles at dqydj.com, household income percentiles. 

But that is unlikely. The snap-shot picture of this period shows that wage growth froze for the 80% of workers who are "nonsupervisory workers", and government social benefit transfers increased, particularly Medicaid, Medicare, Social Security, and so on. Yet the social benefit transfers only filled about a third of the income loss experienced by the majority 90 percent.   

Economic growth has rewarded only a fraction of U.S. households. The average annual household income is over $165,000, yet the majority of households have incomes below $71,000.(Total national income is $22.046 trillion, page 10 of Fed's Flow of Funds report, March 2023; total households is 131 million, U.S. Census, hence the $165,000 average for all households.) In the U.S. the average height for all humans is 12 feet tall, yet the majority of people are under 6 foot tall -- a mental picture of our inequality. There are a few enormous giants and many sickly midgets --- the U.S. economy is not well. 

         I am posting three graphs: the first shows the rate of income growth since 1976 (adults, factor income, age 20+), 

the second shows the dollar amount of growth, and 

the third shows the growth in household costs and the non-growth of wage income. The near-incredible disparities show a broken economy. The cost of living has increased in certain areas including health care, housing, education, childcare, and retirement savings, but wage income growth has not matched rising costs. See the third graph below.

The above shows 

  Rate of income growth since 1976  for four groups, top 1%, the 90 to 98 percentile group, the 50 to 90th group, and the lower-earning 50% group, and the average for all in white: 

                        

The above shows 

 Income growth in "Real dollars"  for the same four groups. 

              Real Income in 1976    Real Income 2023    Income Growth since 1976   Gain

Top 1% ----         $487,900                  $1,900,000                   282.5%                  $1,400,000

Next 9% ----        $124,100                    $269,000                    117.2%                    $144,900

50% to 90%  --      $57,600                      $92,100                      59.8%                      $34,500  

Lower 50%  ---      $15,700                      $18,400                     18.2%                         $2,700  

For all adults         $46,900                       $88,800                     89.2%                      $41,900

The next graph below shows the rise in prices for healthcare, school and childcare, and the flat line of "workers' income" ("Employed full time: median real weekly earnings, wage and salary workers, age 16 and over")  (an edited graph from the Fed's FRED series). I could not find a "real" housing sales price graph, but that is also a major increase in family expenditures with stagnant incomes. But I did something clever: I found "median sales price of houses sold" and the "average weekly earnings for . . . nonsupervisory workers" for two years, Jan. 1976 and Jan. 2023. I found that the house bought in 1976 cost 4.4 times the annual earnings of the NS worker, and in 2023 it cost 8.5 times his or her average yearly income. There are a combination of reasons that the rate of home-ownership has not slipped downwards, (it was 64.6% in Jan 1976, and in Jan. 2023 was 66.0%) but undoubtedly it now requires a greater income sacrifice. 

When the income for half the families and households has barely risen since 1976, how might these expenses be dealt with? The top red line is healthcare, the middle line is tuition, school and childcare, and the lower line the stagnant wages for wage and salary workers, over 80% of all workers, since 1976. 

______________________________________________________________

The above graph compares prices to income, from the OECD report (page 78). The median household income increases by 23% (though the Fed's FRED graph shows an increase of 17%), housing costs by 70%. Another factor to consider is brought out in the report about women joining the workforce and contributing their incomes to the family budget. ". . . the average middle class couple works 600 hours more per year than in 1975". Without women joining the work force there would have been no gain, as the authors state (1979 to 2013), "In middle-class families, the average annual income grew by $8,984. But, like low-income families, this change was also entirely due to women’s added hours and earnings."  

And between 1979 and 2013 the following list of changes: the "Real Gross Domestic Product per capita" increases by 34%. As usual, the real median income increases 6% (see here, page 23), at a sixth  the rate of the per capita GDP, 34%. And to confuse you a little more, the "average weekly earnings for production and nonsupervisory workers" (80% of the workers) between 1979 and 2013 went down 7%. And "real median earnings" for the same 80% went down 1%. And what happened to wealth (total household net worth)? It went up by 181%. Scratch your head. Makes you wonder where the rest of the money went. 

____________________________________________________________________________________

The source is the Economic Policy Institute. It shows the separation in 1979, since then productivity has risen almost 4 times faster than typical worker wage income. The wages of the typical worker would be 40% higher had they tracked the productivity growth. A family income 40% higher than the median household income is just under $100,000 -- a gain from $71,000 to $100,000. -- $29,000.  

One more graph showing rising inequality and lower union participation rates, or density: 

Same story, in 1976 about 33% of income goes to the top 10%, but in 2007 50% goes to top 10%, a shift of 17%. The graph originates from a 2012 report from the Economic Policy Institute, author Colin Gordon, professor of history at University of Iowa. It's a video/graph with narration. 

  Rising Costs and Inflation  
 An article at "The Balance" shows that the cost of health care per capita in 1976 was (in real dollars) $3,178 and in 2020 was $12,530. The Federal Reserve graph for  Median House Sales Price shows the "real" cost in 1976 at $232,448 and at $436,800 in 2023, a rise of 88%; in the year and a half between Q2 2020 to Q4 2022 it jumped 48% (from $322,600 to $479,500). The cost of "Tuition, Other School Fees, and Childcare" rose in "real dollars" in 1978 from $277 to $831, tripling in cost, in 2023. Yet, the price of food stayed  almost identical 1976 to 2021 (it was about 2% cheaper), but between April 2021 to April 2023 food  costs have risen by almost 18% (17.7%). 

The inflation story is not well understood. Corporate profits have gouged the public. 

Nonfinancial corporate profits rise by 103% in 2.5 years 

Retail Trade Profits Double, up 100%, in two years, how is it possible?

The Federal Reserve's Flow of Funds report of June 2023 shows (page 18, line 1, Pretax profits) a 103% rise in profits from 2019 to Q2 2022. Profits for 2019 stood at $1,235.2 billion, and in Q2 2022 at $2,507 billion, up 103%. Nonfinancial corporations made $1.271 trillion more profits in Q2 2022, and that comes to

                   an added expense of $9,708 to every U.S. household.   

The official 2021 median household income was $70,784, so obviously most people are struggling with the added $9,700 of expenses that have gone directly from the family budget into corporate profits. Later on I have quoted results from the U.S. Census Pulse Surveys showing that over 80% families with medium to lower incomes are struggling.   

Wages grew by 2.9% in chained 1984 dollars, in comparison. 

The above graph shows the great surge in "average weekly earnings of production and nonsupervisory workers", which receded as the Covid epidemic receded and employment levels returned to normal. Unfortunately for 80% of the workers who are "nonsupervisory" their incomes did not keep up with the continued surge in corporate price hikes and profits.   

The Bureau of Economic Analysis, Department of Commerce, also shows similar data, see BEA.gov. 

The following graph shows the profits for just "Retail trade" over two years, a doubling of profits, from 2019 to 2021, and holding steady in 2022. Profits in 2019 were $155.6 billion, and in 2021 were $311.3 billion -- a little more than double. (From Table 6.16D)The graph shows years 2014 to 2022. Have average wages doubled in the past 2 years? No, in fact the Real median household income fell from $72,808 to $70,784 from 2019 to 2021. A basket of goods costing $100 in December 2019 cost $118.05 in April 2023, total inflation devaluation of 18.05%. Incomes did not keep up with inflation.  

                                    

The graph originates from BEA.gov (Bureau of Economic Analysis, Department of Commerce), Table 6.16D, Interactive Tables. 

All corporate profits except financial corporations rise by 78.8% over three years  

A profit of $100 in 2019 is now a profit of almost $180 in 2021 and 2022 -- for all nonfinancial corporations. 

"Predatory Value Extraction: How the Looting of the Business Corporation Became the US Norm and How Sustainable Prosperity Can Be Restored"

 

William Lazonick's most recent book title summarizes the mindset of U.S. corporations. 

Vultures are feasting on the value of their own corporations and on the U.S. public as well.

Strong words, but the facts reflect this practice. 

There are no longer "supply bottlenecks" depressing the supply of products which drive up the prices. High prices reflect a coordinated value extraction by companies. 

On Table 10, line 13, of this May 2023 BEA report, nonfinancial corporate profits are at $$2.2412 trillion, while 3 years prior on this BEA report for 2019 they were at $1.2080 trillion -- indicating a gain of  85.5%. Profits peaked at 89% higher in Q3 2022 and have come down a little. Profits tend to fall when material and labor costs rise -- it's obvious. Mark-ups is the only reasonable explanation, as the essay by Mike Konczal and Niko Lusiani at the Roosevelt Institute have argued in their essay "Prices, Profits and Power: An Analysis of 2021 Firm-Level Markups". An added $8,100 in expenses per household is the effect of these price gouging practices.  

 

In three years profits are 78.8% to 89% higher for all corporations, except financial corporations, is the finding of the BEA graphs and data. How can all corporations increase profits by 25% per year for 3 straight years when the costs of everything are rising due to record-breaking inflation? If a corporation pays more for materials and labor expenses, then profits tend to fall. Rising costs of everything decrease profits, make it far more difficult to earn a profit. The following graph shows, "Pre-tax profits increased from $1.236.7 trillion to $2.211.7 trillion, by $975 billion, or by 78.8%, which also adds $7,442 per household to family expenses." I took this sentence from my essay of January, 2023. The numbers originate from the Bureau of Economic Analysis, Table 6.16D (BEA.gov). Over a three year period, 2019 to 2022, "domestic nonfinancial corporate profits" increased by $975 billion, or by 78%, a hefty expense ($7,442) to the ordinary families of America. This is the graph:

 

A scholarly paper at PERI by Isabella Weber and Evan Wasner argues that "In contrast, we argue that the US COVID-19 inflation is predominantly a sellers’ inflation that derives from microeconomic origins, namely the ability of firms with market power to hike prices. Such firms are price makers, but they only engage in price hikes if they expect their competitors to do the same."

In an inflationary economy, profits are more difficult because businesses pay more for input costs such as labor and materials. Consumers with sub-inflation wage gains buy less products as their dollars buy less. This cuts into corporate profits. Excess profits are possible only by price mark-ups in excess of already high costs, or by selling far more which did not happen. This graph above indicates a strange condition of ill-health in the U.S. economy that effects negatively the poorest population in the U.S. 

The next graph, from the BEA, shows the track of personal consumption (in billions of dollars from 2010 to June of 2023). The question is: Did personal consumption drive inflation? 

The above shows personal consumption expenditures over 13 years. The spending trajectory was disrupted for 13 months, as the dip clearly shows. By March of 2021, when the vaccine was being disseminated, spending returned to normal. The unemployment rate in March 2021 was still high at 6.6%, and the employment to population rate also had not recovered, for ages 25 to 54 it was down from 80.5% to 76.9%. But personal consumption resumed its normal course. Was consumption driving inflation? I don't see it. 

 

I have an essay on inflation here. Another economist, Servass Storm, has contributed his assessment and he summarizes it saying, "Two-thirds of the U.S. profit share growth reported in Table 1 can thus be attributed to corporate profiteering. . . .  The increase in the profit markup by U.S. firms explains the remaining (almost) two-thirds of U.S. profit share growth during 2020-2022 (as was already clear from Figure 5)."

 The Census's almost monthly Pulse Survey  -- People are Stressed  

Yet, the U.S. Census Household Pulse Survey, of April 10, 2023, shows 39% of those who responded indicated "somewhat" or "very difficult" paying "normal household expenses" (Household Spending, Table 1). This is almost identical to the ALICE report from United Way charity that states 41% of adults experience hardship or poverty. The Pulse survey further states that 75% of all answered "moderately" or "very stressful" to "level of stress caused by increase in prices". (See Household Spending, Table 4) Among the 60% of U.S. adults with household incomes below $75,000  80% to 89% indicate "moderate" or "very stressful" level of stress. 

The worst news from the Pulse Survey comes out of Health Table 2 which asks about "Frequency of feeling down, depressed, or hopeless" in the last two weeks; some 64% report either "several days" (25%), or "more than half the days" (17%) or "nearly every day" (22%) -- for  a total of 64% who suffer this hopeless depression. Those with incomes above $200,000 had a 51% depression rate, those with incomes below $25,000 had a 70% rate. Therefore, feeling "down, depressed, or hopeless" tracks income level and is more common than joyful, carefree or blithe. How do you feel? Blithe, and humming with joy? I hope you're having a good day. Maybe you should take a break from reading depressing news and relax? The universe is burgeoning with prem energy, didn't you know? Prem means "love". We should all bask in this love, if we can. The Pulse Surveys are under-reported and depressing. This most recent one was #56 since 2020 when they began. The Center for Budget and Policy Priorities carried several articles during the pandemic.  

Nine Households earn $1, and the Tenth Household earns $10 

The Great Depression was caused by inequality. All the banks were shut down on the day FDR was inaugurated. Capitalism without banks is impossible. "Death bed" may be the appropriate description.

The Great Depression was caused by high inequality. There are other important factors, but a general malaise of purchasing power was a large factor. This was argued by the head of the Federal Reserve, Marriner Eccles, and also John Maynard Keynes. Eccles said "a giant suction pump" had stripped purchasing power from the majority of society, they could not buy the output of goods that they produced, and that collapsed the economy. Keynes said as much in his January 1933 "Open Letter" to FDR. He urged, "The stimulation of output by increasing aggregate purchasing power is the right way to get prices up; and not the other way round." That is, government employment creates income which will raise the "aggregate purchasing power". 

Federal spending directed at "direct job creation" in the WPA and CCC and PWA increased employment. As a result consumer purchasing revived, and corporate profitability was resurrected, and that brought us out of the Great Depression. Read the article here by Marshall Auerbach, the unemployment rate fell from 25% to 9.6% in 4 years, 1933 to 1937, caused by public employment. FDR won the 1937 election with 98.5% of the electoral votes and 60.8% of the popular votes. The economist Daniel Alpert writes that we need such a program of fiscal boosting today. The web page for the National Jobs for All Coalition has been making the case for "sustained full employment" for decades, and my recent post explains the campaign for a minimum wage of $21.50, that post immediately follows this one.   

The U.S. economy can be portrayed simply as 10 workers together earning $19; the lower-earning 9 each receive $1 and the last worker, #10, receives $10, a $1 for 9 and a $10 for 1 ratio. The top-earning #10 earns 53% of all income (divide 10 by 19 = 53%). The other #s 1 to 9 receive $1 each (divide 9 by 19 = 47%). Nine people earn a buck, the last worker earns ten bucks. This is a broken economy, no way around it. 

Here's the graph from RealTime Inequality showing "Income Share" for January, 2023:

                       

As I did above, I'll compare the 1976 income shares with the 2023 shares:

                       Income share 1976       in 2023               shift

Top 1%                    11.2%                  22.9%               11.7%   Top ten% earn 53.1%  

Next 9%                  26.4%                 30.2%                 3.8%    Top ten% gained 15.5%    

50 to 90%                50.4%                 39.1%              -11.3%    Lower 90% earn 47.0%  

lower 50%               12.0%                   7.9%                -4.1%    Lower 90% lost 15.4%     

15.4% of the national income equals $3.4 trillion, or over $29,000 for every household in the lower-earning 90%, 117 million households. 

  Income ratios  

In this next section I apologize for all the numbers. Try to read the large print, skip the other stuff. I try to show the ratio between the lower 90% to the top 10%, both the pre-tax ratios and the post-tax ratios.  

 In 1976  --  Pre-tax Income Ratios 

The top 10% took in     37.6%

The lower 90% took in 62.4%

When 9 workers earn $62.4 then each earns $6.93.

The ratio 6.93 to 37.6 is also 1 to 5.43

The ratio is $1 for 9 workers and $5.43 from the tenth worker  --  1 to 5.43 

In 1976 --  Post-tax Income Ratios 

The top 10% of households take in 32.0%

The lower 90% take in                     68.0%

The ratio is $1 for 9 workers and $4.24 for the tenth worker  --  1 to 4.24  

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In 2023  --  Pre-tax Income Ratios 

This is the crucial ratio, it shows the untouched voracious inequality we now experience. 

The top 10% of households take in 53.1%.

The lower 90% take in                    46.9%

The ratio is $1 for 9 workers and $10.07 for the tenth worker  -- 1. to 10.21 

The top tenth earns $53.10, and the lower nine together earn $46.90, and that divided among nine is $5.21 for each of the nine. (5.21 X 9 = 46.90)

The ratio 5.21 to $53.10 is the same as 1 to 10.21. 

               Nine receive $1, and the tenth receives $10.21 

                               A broken economy.    Give it some thought; this is really broken. 

In 2023 -- Post-tax Income Ratios 

The top 10% of households received 41.7%.

The lower 90% of households receive 58.3%.

When 9 workers earn $58.3, then each earns $6.48.

The ratio 6.48 to 41.7 is 1 to 6.43. 

The ratio is $1 for 9 workers and 6.43 for the tenth worker   --  1. to 6.43 

The 1976 pre-tax income ratio is 1 to 5.43, it is reduced by taxes to 1 to 4.24. 

The 2023 pre-tax income ratio is 1 to 10.21, it is reduced by taxes to 1 to 6.43.

The inequality of 1976 was reduced by 22%, about a fifth. 

The 2023 reduction is 37%. There were more social programs in 2023 to balance the loss of income for the lower 90%. My snapshot view is that the lower 90% lost 15% of national income, but this was compensated by an increase that made the loss about 10% in the post-tax picture. I would argue that seniors benefited more than other populations. 

The above compares "factor income" (which is earned or market income) with "post-tax" income. 

Post-tax and post-transfer (for social benefit programs) income ratios today are not $1 to $10.21 but $1 to $6.43; 

the top 10% receive 41.7%, the lower 90% receive 58.3%. 

The ratio is $1 to each in the lower 90% to $6.44 to each in the top 10% -- the post-tax ratio. 

For 2023 the "post-tax and post-transfer" ratio is $1 to $6.43. 

The pre-tax incomes share, in 2023, for the 10% was 53.1%, and is reduced post-tax to 41.7%.

(The lower 90% receive post-tax 58.3%, and 58.3 divided by 9 =  6.48% for each decile, and top ten percent's share of 41.7%, and 41.7 divided by 6.48 = 6.43 -- therefore 1 to 6.43 is the ratio of average post-tax income for the lower 90% to the income of the top ten percent) --- that's for 2023.

For 1976 the "post-tax and post-transfer" ratio is $1 to $4.24.   

 

The pre-tax share for the top 10 (53.1%) is reduced to a post-tax share of 41.7%, a reduction of 11.4%  -- government taxes create a transfer through social benefits programs. In essence, about a fifth (21.7%) of the top ten's income has been transferred to the lower 90% in the form of normal government services and life-support in 2023. Their pre-tax total income was about $11.7 trillion, their post-tax income was about $9.2 trillion -- a tax bill of $2.5 trillion or 21%. This 21% figure is unusual, it implies an overall effective tax rate of 21%, which is much lower than other estimates I've read. See the article Who Pays Taxes in America in 2020, from ITEP.org at the very end of article. 

 

In 1976 the top ten percent's pre-tax share of 37.6% was reduced to 32.0%, a shift of 5.6%, not a shift  of 11.4% as in 2022. This smaller  shift was permitted because the incomes for the 90% were adequate and prices were also lower in inflation adjusted dollars.  

The RAND Corporation report "Trends in Income from 1975 to 2018" states in its Abstract that,  "aggregate income for the population below the 90th percentile over this time period would have been $2.5 trillion (67 percent) higher in 2018 had income growth since 1975 remained as equitable as it was in the first two post-War decades." Let's take the income of the 45th percentile, the median of the lower 90%, and increase it by 67 percent: $62,000 becomes $103,000, an increase of $41,000. (I used the dqydj web page.) The RAND analysis is not a twin but a close relative to the RealTime Inequality analysis.

I think it very important to reflect on this last "$1 to $10.21" pre-tax ratio and compare it to the 1976 ratio of "$1 to $5.44". The quality of life would be enormously improved, no doubt. 

The average income for the top 10.6% of taxpayers is $474,745 for the 2023 year (see the table below from the Joint Committee on Taxation). The RealTime Inequality analysis shows the average for the top ten percent is $641,000. The CJT table shows that all top 10.6% earn over $200,000, but add up all their income and divide by the number reporting, 10.6% of all taxpayers, their average is $474,745. 

RealTime Inequality reports the average income for the top 10% was $641,000. This is 35% higher than the JCT figure. More important, the average income of the top 10% compared to the lower 90% is 

10.2 times higher -- it takes 10.2 taxpayer incomes to equal one in the top 10%.

The lower 90% has an average household/taxpayer income of $62,900, the top 10% has an income of $641,000 

-- the difference is a multiple of 10.2.   !!!!   

I must be trying to shout with those !!!!. 

It must be false -- perhaps a false view is more comforting. 

In 1976 the multiple was 5.4 times. I realize that I'm repeating myself, these multiples are expressed above, "pre-tax income 1 to 5.43 in 1976, and pre-tax income 1 to 10.21 in 2023. 

Social Security Report on Wage Income 

Now we might also look at the wage income report from the Social Security Administration. I will  compare the average wage income of the lower earning half of all U.S. workers with the hourly income of the top 10%. 

The SSA report shows that 30% of U.S. workers earn less than $20,000 per year. 

Their average annual income is $8,274. Not much. 

The median earnings for 168 million workers in 2021 was $37,586.03 -- not .02 or .04, but .03.

The report also shows 52% of U.S. workers have an average income of $17,544 per year. Again, not much. They earn collectively $1.552 trillion, which is about 7% of the national income of $21 trillion (for 2021). Ouch! 

U.S. Labor Force Statistics 

The U.S. labor force is confusing to me. With help from the Jobs Quality Index and the Bureau of Labor Statistics I'll explain some basics. 

How many are working in July 2023? 161 million.

The "labor force" is 167 million. So 6 million (actually 5.8 million) are not working, the unemployment rate is 3.5%.

How many work full-time? About 137 million.   

How many part-time? 26 million (26.488 million) or 16.4%.  

And to add more confounding details, 30.5% were partial year or part-time workers in 2017. 

So, on top of the roughly 17% who were part-timers is another 13% who worked only part of the year. 

How many are nonsupervisory workers working full-time? 108 million. (The Job Quality Index has also the exactly same figure as bls.gov) 

Therefore 67% of workers are full-time and nonsupervisory workers. 

Full-time nonsupervisory workers and part-timers (mostly nonsupervisory workers) together are 134 million, or 83% of all workers. 

Therefore, 108 M work full-time, and another 26.5 M work part-time, a total of 134.5 M nonsupervisory workers. 

Therefore 26.5 M are supervisory workers or self-employed, but make it 24 million because there are 2 million workers in agriculture. The self-employed can be independent contractors, carpenters, barbers, window washers, owners of restaurants, dentists, CPAs, consultants and supervisors are employed (non-independent) supervisorial managers and highly paid executives. 

My big point is that almost 60 million full-time workers and almost 26 million part-time workers, call it 86 million or 53% of all workers are earning very low incomes. The SSA report shows that 52% of workers collectively they earn less than $40,000/year and on average $17,544 per year.

Did you get that?   --- Half earn on average $17,544/year. The average household income is around $165,000 per year.  

The Job Quality Index deals only with full-time workers; it shows the lower-earning 55% earn an average of $35,300 per year. 

And the higher-earning 45% earn $69,210 per year, about double the lower-earners. 

The average for both high- and low-earners is $50,842 per year. 

Two workers earning $35,300 will have a household income of almost $71,000, near the median.  

We look at the Social Security Administration report on wage income. 

It shows for 2021 the middle worker, #84 million out of 168 million workers, earned $37,586, and the average income for all 84 million low-wage workers in the lower 50% was about $17,000. This is just above the wage income of a minimum wage worker working full-time year-round, $15,080. The average household income is $165,000 per year (remember with national income at $22.3 trillion divided by 133 million households, this equals $167,669). 

At this point, I can't handle the numbers, all I can see is that incomes for about 57% of workers are  extremely low. There are about 50 million nonsupervisory workers doing well, about $70,000 per year, and there is a portion of independent and supervisory workers also doing very well, extremely well in some cases (10% of households have incomes above $200,000). But the average for the lower half of all workers is around $17,000, and the average factor income for the lower 50% of households/taxpayers is $18,400 (RealTime Inequality) -- while the income for the upper 10% is much higher, about $475,000 (JCTaxation) or $641,000 (RealTime).  

Compare $17,000 with $474,586 or $641,000.  

        What's the ratio? --- 1 to 26 or 1 to 30. 

    Can't we do better?    

          

I'm comparing the yearly income of half of all workers with the yearly income of about a tenth of all workers, a ratio of 1 to 30. It would take 30 years for that low-wage worker in the lower half to equal the one year income of the average income in the top 10%. The average work-life is about 45 years. 

Yes, many in the lower half work part-time or just a short part of the year, or are disabled, and are very low-skilled. It's not a fair comparison. But looking at the Job Quality Index from NYU Buffalo we learn that 54% (or 59 million) of all full-time and year-round workers earn an average income of $35,015 per year (that's $16.83 per hour and $673 per week, for April 2023). That's about 59 million workers. Two such workers together earn about $71,000, just about the median household income.  

Half of U.S. workers (84 million), including part-time workers, are taking home about $17,000 per year (adding part-time with low-paying full-time workers, using the SSA wage income report) which means a pay rate of not even $8.50 per hour over a 40 hour week, compared with 10% who are earning about $228 or $295 per hour.  

Half of all workers earn $8/hour, and 10% earn $228/hour, or is it $295/hour! It makes me squirm. 

    Is the income distribution a just distribution?   

For every $1 received by an average someone in the lower 90%, the average someone in the top 10% receives $6.43 (after transfers and taxes). Shall we agree that this is not fair? 

I have a brother-in-law who worked long and hard hours designing airplanes for NASA, he earned over $150,000 per year; he deserved more than I as a public school teacher (median pay for a high school teacher is about $63,000 in 2023). But how much more? Did he deserve 6 times more than say a clerk at Home Depot or some other cheap-paying retailer? 

                 Executive Excess,     a report       

The report Executive Excess says, "In 2022, the CEO-worker pay gap at the 100 lowest-wage major companies averaged 603 to 1."    

"In 2022 Lowe's spent more than $14.1 billion on stock buybacks to enrich its executives. That's enough to give everyone of its 301,000 U.S. employees a $46,923 bonus." 

If Lowe's were owned by its workers, as a worker-owned coop, the average pay would by over $76,000. And they could still pay dividends. 

The median worker pay at Lowe's was $29,584; and at Home Depot $30,100, and at Walmart $27,136.

The CEO of Lowe's owns $108 million in stock options and received a salary above $17 million. 

Read the report, Executive Excess. 

As I mentioned earlier, in 1976 the ratios were much different,

                               a 15.4% shift of income share has happened. 

Restoring the 1976 ratio would mean a $29,000 income increase for all 117 million households in the lower-earning 90%. This would eliminate poverty and create a healthy middle class, at least. And we could do even better. 

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The same result can be culled from data at ITEP.org (once called Citizens for Tax Justice). 

For every dollar earned by some average one in the lower 80%, some average one in the higher 20% earns $8.05. I went to ITEP.org, “Who Pays Taxes in America, 2020” for their data on income distribution, found at the bottom of the report.

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The same result can more or less be calculated from the May 11, 2023, release of the Congressional Joint Committee on Taxation, page 39, the table on projected income for 2023, see below: 

    

The table shows under "Share of Income" that 10.6% of all "taxpayer units" earn above $200,000, and they take in 46.3% of all income. 

I ask "What is 46.3% of $19.926? -- answer is $9.225

   and "What is 53.7% of $19.926?  -- answer is $10.70

Then divide $10.70 by 9 --           answer is $1.18 

 Nine receive $1.18, and one receives $9.22 --- the ratio is 1 to 7.8

                                   not far off from the RealTime Inq. numbers.

The CJT reports the income of 183 million "taxpayer units", and the Census reports there are 131 million households, so some households have two tax filers --- about 50 million file joint returns, that's 40% of all adults, and 37% of all households. Note the total income projected is $19.9 trillion, a little lower than the $22.2 trillion at RealTime Inequality. This $2.3 trillion difference of reported vs actual income may also indicate the lost tax revenue of $1 trillion the IRS is unable to collect.  President Trump's IRS Commissioner, Mr. Rettig, placed the shortfall at $1 trillion each year; other estimates are considerably lower. Main point: one of ten tax filers receives about $8, the other 9 out of 10 tax filers receive $1. 

This is a broken economy.  

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Wealth and Hoarding 

$100 trillion in new wealth was created over a 14 year period! 

In nominal dollars, total private wealth tripled in 14 years, from about $50 trillion to $150 trillion. 

The Flow of Funds, from the Federal Reserve, shows private wealth grew from $48 tr. to $148 trillion.

In 2022 total federal government revenue was $4.9 trillion (for comparison). 

Over 14 years the federal government collected almost $40 trillion, but none of it was from a wealth tax. 

What was the total personal income over 14 years? Total nominal income was $326,125 trillion over 14 years -- see BEA.gov, Table 2.1. And personal savings total over 14 years was $16,539 trillion, about 5.1%. (see Line 34 of Table 2.1). 

Therefore a savings of $16.5 trillion created a wealth increase of over $100 trillion. 

                                MAGIC !!!    

Saving $1 over 14 years became $6 of wealth! Putting money aside as savings or wealth was more profitable than working. This is why corporations borrow billions to buyback their own stock; their share holders profit in actual economic well-being, while the company lags in competitive productivity improvements. William Lazonick's essay about Cisco Corporation shows the looting of this company by this practice. 

Wealth growth has been astronomical in the past 14 years, January 2009 to January 2023; it has grown from a nominal $48.592 trillion (see here, page 104 from the Fed's Flow of Funds report) to $148.835 trillion (see here, page 138). Wealth has grown by over $100 trillion in 14 years.  

Adjusting for inflation, the "real" growth has been from $68.850 trillion to $148.835 trillion, 

                                                                                                              a growth of 116%. 

How much did Real GDP per capita grow in that 14 years?                              ---   23%

And how much did Real "disposable" personal income grow in that 14 years?  ---  22%  

And how much did average weekly earnings of nonsupervisory workers grow? --- 10% 

What causes inordinate wealth growth? 

Answer: The economic surplus all goes to the already wealthy. Saved money is placed in a finite pool of financial resources (U.S. and international corporate stocks and bonds, and government bonds). The assortment of valuable financial assets is much too small for the flood of money, the demand. How much did the S&P 500 grow from January 2009 to June 2023? Answer: it quadrupled; it increased from around 1100 to around 4400. Adjusting for inflation it increased by a multiple of 2.8 times, or 180%,  nearly tripling. Average weekly earnings for 80% of workers increased by 10 percent. 

  

A graph in my recent essay showed the history of corporate stock buybacks and dividends: 

The source is this 2022 essay by William Lazonick. 

Professor William Lazonick has published for more than a decade reports on great corporations distributing their profits to shareholders. In the essay of 2022 he states that 216 large corporations have remained on the S&P 500 for 38 years, 1981 to 2019. He says, "From 2017 to 2019, buybacks for the same 216 companies were 62.2 percent of net income and dividends 49.6 percent." (page 16). That means 111.8% of the net income were distributed to shareholders, either with dividends or stock buybacks. Corporations borrowed billions in order to buyback their stock, thus raising stock prices and the total value of financial assets. I'm familiar with his other reports that claim that 91% of profits for major corporations have been distributed to shareholders. His Harvard Business Review article of 2014 states, 

"The allocation of corporate profits to stock buybacks deserves much of the blame. Consider the 449 companies in the S&P 500 index that were publicly listed from 2003 through 2012. During that period those companies used 54% of their earnings—a total of $2.4 trillion—to buy back their own stock, almost all through purchases on the open market. Dividends absorbed an additional 37% of their earnings. That left very little for investments in productive capabilities or higher incomes for employees."

That is 54% plus 37% for a total of 91% of earnings. This is the source of the stock market and financial asset surge. This article won the Harvard Business Review "Best article" award for 2014. 

The MAGIC of the wealth increase of a real 116% between 2009 and 2023 is in the corporations dispensing at least 91% of their profits to the small number of Americans who own corporate shares, or stock. A flood of dollars raised the price of a finite supply of financial assets -- wealth increased astronomically. Need I say that workers were not included in the growing wealth phenomenon. 

RealTime Inequality has the capacity to show the relative growth of wealth for the four groups I've concentrated on, the top 1%, the next 9%, the 50 to 90th percentiles, and the lower-saving 50% of households. Here's the graph: 

                       January 2009      April 2023    wealth growth        % growth

    Top 1%           14.2 mn              27.1mn          12.9 mn                   90%

    next 9%            1.7 mn                2.9 mn            1.2 mn                  70%

   50 to 90             207K                     469K               207K                  79%

lower 50%            $392                neg $152          negative                negative

During the past 14 years, the top 1% received 51% of all wealth gains; the next 9% received 23%, and the next 40% received 26%, and the lower 50% received no percent of the total wealth gains in "real" dollars. You'll have to take my word for this. I looked up "Total real wealth", and "households". It is a little imperfect because they define household in terms of 183 million tax filers, which is much different than 131 million actual households. 

Suffice it to say, the top 10% received 74% of all gains, the next 40% received 26%, and the lower 50% received zero. 

   

And for the entire period, 1976 to 2023, the graph shows even greater polarity: 

                                     

The above shows wealth growth in real dollars, 1976 to 2023. 

I looked a long time at these grafts. What I conclude is that the average wealth for the top 10% is ten times the average for the 50% to 90% group. This is too large a gap. It holds true for both 1976 and 2023. 

The above shows the growth of average "real worth" for the top 1%, the next 9%, the middle 50 to 90% group, and the lower 50%. 

Again, the top 10% takes in 75% of new wealth in the past 47 years. The top 1% takes in 40% of all, the next 9% take in 35%, the 50 to 90% group takes in 25%.

 

The share of all wealth (another graph at RealTime Ineq.) shows the top 1% grew from 24% to 38% (rounded figures)

      The next 9% had 44% in 1976, now has 36%.

       The top 10% therefore owns 74% of all wealth. (38% plus 36% = 74%)

       The middle 50 to 90% group had 32%, now has 26%. 

       The lower 50% had 0.2%, now has 0%. 

All wealth is reported at $132 trillion, different from the Flow of Funds figure of $148 trillion. 

       Unproductive Wealth   

Another consequence of extreme inequality is unspent money. When wealthy people accumulate more and more they save it in a safe place, unspent. It becomes unproductive, it buys nothing, creates nothing, and becomes a hoarded mass of wasted resources, or stacks of paper financial assets, digital or otherwise. We have more savings than ever as a percentage of annual income. The Fed's Flow of Funds displays this ratio between annual disposable personal income (DPI) and private net worth, on Table B.101 (line 50). In Q1 2022 the ratio peaked at 835.88 --- DPI is 1, wealth is 8.3588. That means 8.35 times more wealth than annual income. In 1987 the ratio was 496.2. People with very high incomes do not spend it or invest it, lately they mostly save it and watch it grow magically. And frankly, I think it is a curse on the nation. The incentives are totally screwed up.  I haven't researched all the years, but it appears we have today about 50% to 66% more savings than normal, call it $60 trillion. Out of about $150 trillion, about $60 trillion is hoarded. Isn't it time for a tax on wealth, instead of shutting down the government? 

And of course the optimal savings/annual-income ratio is a debatable ratio -- we could survive with a much smaller amount of national savings. In 2019, a normal year, federal outlays excluding Social Security were $4.2 trillion (adjusted for inflation). Call it $5 trillion -- We have almost $150 trillion in savings. What does that tell you about the "debt ceiling"? It could easily be paid with a minor tax on wealth. A tax on wealth has recently been proposed, read the next paragraph. In fiscal year 2019 the federal budget spent $3.540 trillion excluding outlays for Social Security. Therefore, 2.3% of all private savings was the sum of all federal spending excluding Social Security in 2019. Social Security is funded by a payroll tax, not a personal/household income tax. 

Even if we had a normal $90 trillion in savings we could still pay off the public national debt of $24 trillion in a blink. Donald Trump called for such a plan in 1999. Since Trump called for it, it must be wise. Veteran Congresswoman Barbara Lee, along with others, proposed recently a mild wealth tax, you can read about it at Common Dreams. 

Thomas Piketty on a Wealth Tax 

Interviewed on the Roosevelt Institute podcast, Piketty explained that an increase of the income tax on high incomes was not enough to effect wealth and income inequality; in the middle he says, "the problem with an income tax is that when you’re very wealthy your income is very often a ridiculously small fraction of your true economic income and of your true wealth, you can increase the tax rate on income as much as you want. But if the tax base itself is a ridiculously small fraction of the wealth, that’s not going to work. Only a wealth tax can change this."

"Ridiculously small fraction" he repeated twice; if wealth grows at $7 trillion per year over 14 years (to increase by $100 trillion) this $7 trillion dwarfs the growth of income, and distorts your  "true economic income and of your wealth". As I calculated already, the total national savings over the 14 years was $16.539 trillion (or 5.1% if all disposable 'post-tax' personal income, DPI), which is about $1.2 trillion/year. (16.539 divided by 14 years = 1.18) So the income saved is $1.2 tr., and the wealth that grows subsequentially is $7 tr. --- the income is a "ridiculously small fraction". Wealth money grew actually 6 times greater than income money. The wealth tax is a necessity. 

  

Tax Cuts Are Primarily Responsible for the Increasing Debt Ratio,

 ---- the title of an article at Center for American Progress. The introduction states, 

" . . . the true cause of rising debt: Tax cuts initially enacted during Republican trifectas in the past 25 years slashed taxes disproportionately for the wealthy and profitable corporations, severely reducing federal revenues.  . . . If not for the Bush tax cuts4 and their extensions5—as well as the Trump tax cuts6—revenues would be on track to keep pace with spending indefinitely, and the debt ratio (debt as a percentage of the economy) would be declining."

The Historical Tables of the U.S. budget (Table 1.3) show the federal deficit averaged 2.8% of GDP during the last 3 "budget years" of Obama (through 2017). But the average for the first 3 years of Trump's term was 4.0%, about 70% higher than Obama's 3 years, thanks to the Trump tax cuts. Then in Covid-19 year 2020 the deficit was over by 14.9%; in 2021 it was 12.3%, and in 2022 it was down to 5.5%. Is it time to close down all government spending? The economy has experienced a surge in "total household net worth", nominally tripling in 14 years (from about $50 trillion to $150 trillion); and ratio of national disposable income to wealth is at its highest, there is an excess of about $60 trillion in savings, which is about 225% of GDP. We could tax about 5% off that 225% and balance the budget. My radical solution which may make perfect sense. Congresswoman Barbara Lee agrees, she stands for me.   

If you had an emergency expense of $1,000, plus you had a savings of $500,000, would you be looking for a loan, or threatening bankruptcy? Would you just stop payinig all your bills, the way GOP Congressional reps are calling for?  

    Growth of Wealth  

Below is a graph from RealTime Inequality showing the growth of wealth for various household  groups. As we would surmise after looking at the income data, the top-earning groups had the greatest wealth growth. It shows the growth for "adults age 20+". One can also go to Credit Suisse' Global Wealth report, 2022, Databook, page 140, which shows the lower-saving 40% of U.S. adults own 0.1% of all wealth. Do the math -- this comes to $1,500 for every adult in the lower 40%. The mean average for 100% of all adults is about $580,000, and half own less than $93,000, the median (page 134). Like the average physical height of all people is about 80 feet, but for half it's less than 6 feet, and many are midgets. And on page 121 it shows the Gini coefficient (wealth inequality index) for the U.S. at 85.0 (very high); out of 39 major economies the U.S. inequality is surpassed by only 3 countries, Russia, Sweden, and South Africa.  

The above graph shows 

          real dollar wealth growth since 1976 for households (top 1%, then next 9%, then 50 to 90%, and bottom 50%). The lower-saving 50% peaked its wealth at $4,800 in October, 1989, then went negative, and in March, 2022, saw another peak of $1,500, and now is negative again. 

I've shown this graph before, above, so I'm repeating it.

The above graph shows average wealth per household for:                  Growth since 1976

 
the top one percent, the average household owns             $26,700,000.                498%

The average for the next 9% between 90 and 98% is       $  2,900,000.                 212%

the middle 40 between 50 and 90% own                           $     476,000.                 209%

the lower 50% own                                                            $    neg. -$64          neg. 126%

The average for all households is                                      $     530,000.  (?)           278% 

The Fed's Flow of Funds report shows $147 trillion of "household net worth" and with 131 million households, the average per household is $1,122,000. The above graph shows wealth per adult (with 250 million adults), $530,000 average, (not the average for 183 million tax filers). The graph showing "Share of Total Wealth" shows 74% of wealth is held by the top 10% of households, 26% by the 40% between the 50th and 90th percentiles, and 0% for the lower 50% of U.S. households.  

Poverty hurts and income insecurity hurts. I am an economic determinist. Your income often determines the quality of your life, the safety of your environment, the life opportunities you encounter, the social group you interact with. More and more households are sliding down a slope of insecurity. This is a recipe for massive social trouble that is not easily repaired. 

RealTime Inequality is a product of economists at University of California, Berkeley. 

While I'm at it, I wish to recommend the book "Poverty, by America" authored by Matthew Desmond. It's well researched and makes me think a lot. 

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Bonus Speculation

Let's create the ideal distribution ratio between the lower 90% and the top 10%? 

I choose 1 to 3 ratio, post-tax. Each of the lower 9 deciles would receive $1, while each of the top decile receives $3, post-tax. $9 plus $3 = $12 total. As I've shown, the distribution in 1976 was 1 to 5.43 (pre-tax), and it was reduced to post-tax 1 to 4.24. I gave some thought to a ratio of pre-tax 1 to 4.0 and     post-tax 1 to 3.0 -- Ideal  . 

Nine workers would earn $1 (for $9), while the tenth would earn $3, for a total of $12;                         or 75% would be earned by the lower 90, and 25% would be earned by the top 10%. 

Universal health care, a vigorous public housing investment, a generous Earned Income Tax Credit  along with traditional expenses for the truly poor would reduce the pre-tax ratio,                                            1 to 4, to post-tax 1 to 3.  

The average income for the lower 90% would be $141,000 (with a spread from $50,000 to $230,000).   After $230,000 the top 10% would earn between $230K and $1 million. Maximum income, post-tax, would be $1 million. Picture the slope in an imaginary graph. Also note that in 1976 the average income for the top 1% was $480,977, as shown in the table below the second graphic of this essay. My "ideal" distribution profile looks much like the actual 1976 profile, except for the fact that real GDP per capita has increased by 123%. 

In an economy with a total income of $22 trillion of income (today's total found in the Flow of Funds for national income), the lower 90% would earn 75% or $16.5 trillion. And $16.5 tr. divided among 117 million is $141,000/household.  And the top 10% would earn $5.5 trillion, which would equal $420,000 per household. This is very close to a 1 to 3 ratio. Note that I am dividing the income among households, 131 million, not among "taxpayer units". This changes the outcome significantly from the idea of dividing the $22 trillion among 183 million tax filing units. But bear with me. 

 The income for each decile in the lower 90% will equal about $141,000 per household. That will be the median for the lower earning 90%, and the lowest 10% would have a minimum of $50,000 per year. The median at the 45th percentile would earn  $141,000, and the 9th decile would earn on average $230,000 -- a smooth slope from $50K to $230K for the lower 90%. I imagine a $24/hour minimum wage, which yields an annual income of $50,000 for 2080 hours of work (one year). 

Therefore the slope of the earning line for the 90% would begin at $50,000, and pass through $141,000 at the 45th percentile, and arrive at $230,000 at the 90th percentile. At that point, the 90th percentile, the slope increases from $230,000 to $1,000,000, which I arbitrarily choose as the maximum household income. Income above $1 million would be taxed at a 95% rate. The average income for the top 10% of households would be -- $5.5 trillion divided by 13.1 million -- $423,000, post-tax. The ratio is exactly 1 to 3  ---- 141K to 423K.  --     

This distribution is more fair than the present distribution,  1 to 10.21 -- pre-tax -- 2023                                                                                                  1 to 6.43 -- post-tax  -- 2023                                                                                            Ideal --  1 to 3 -- post-tax -- possible  

 RealTime Inequality shows a 2023 pre-tax income for the top 10% at pre-tax $648,000, and post-tax it's reduced to $505,000, a 22% reduction. My post-tax ideal top 10% income average is $423,000.

The $141,000 average for the lower 90% means a sizeable income gain for that group, the majority of Americans. The highest 10% earning $423,000, ideally, instead of post-tax $505,000, is still very wealthy. I've shown extensively that the top 10% today earn 15.4% more of total income (income share) in pre-tax income than in 1976 (from 37.7% in 1976 to 53.1% in 2023, a gain of 15.4%). For the lower 90% that comes to a pre-tax total loss of  $3.417 trillion, or $29,000 per household. (Reader can probably remember all this from before.) The idea of adding $70,000 to the 2022 median household income, about $71,000, would bring the median to $141K, and this is much closer to the "mean average" of $165,000 (which is $22.046 trillion divided by 131 million households). 

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A few articles supporting the corporate greed theory:                                                                                  From the Federal Reserve: How Much Have Record Corporate Profits Contributed to Recent Inflation?               From the American Prospect: A Return to Rentiership                                                            From The New Yorker: What If We're Thinking about Inflation All Wrong?

And about low wages, listen to this interview with Michael Lind, author of "Hell to Pay -- How the Suppression of Wages Is Destroying America": and read this article, here. 

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If you got through all that you deserve a prize -- I should mail you a tranquilizer, I should pour you a good alcoholic refreshment, and buy you a year's subscription to the Russian Ballet or any ballet troupe. And a sticker to put on your car: Tax the Rich $$$ Beaucoup Bucks. I suggest you take a pleasant walk around town. Try to forget it all. Then remember to vote.