So how's the typical American doing? To be among the top 50 percent of all taxpayers in the U. Adjusted gross income for the top 50 percent of American taxpayers has increased 14 percent since , or before the Great Recession.
By comparison, incomes for the top 1 percent have jumped 19 percent during the same period, according to IRS data. That supports research from the likes of economists such as Gabriel Zucman and Thomas Piketty , who have focused on the increasing gulf between the richest citizens and the rank-and-file.
But again, it has little to do with the rise of the 1 percent. Take some of the most important tech industries: software, internet publishing, data processing, hosting, computer systems design, scientific research and development, and computer and electronics manufacturing.
Combined, they represent just 5 percent of workers in the top 1 percent of income earners. Hospitals are home to 7 percent. Legal services and securities and financial investments industries account for another 7 and 6 percent, respectively. Real estate, dentistry, and banking provide a large number, too:. Computer systems design is the only tech sector among the top contributors.
There are five times as many top 1 percent workers in dental services as in software services. CEOs are of course more likely to be in the top tier, especially if they are in certain privileged industries: 28 percent of CEOs from the financial sector, for instance, and 26 percent of those in hospitals. But 15 percent of college presidents are in the top 1 percent, too.
And what can we do about it? One way that the top 1 percent cements their position is by occupying the financial sector, and accessing above-market returns on their investments. The large and growing prominence of the financial sector in terms of excess pay has a great deal to do with hedge funds, which barely existed before the s but are now integrated into mainstream investment banks like Goldman Sachs and hold over a trillion dollars in assets from pension funds, university endowments, and other institutional and private investors.
A hedge fund is a loose term referring to an investment portfolio that is less regulated than other funds, because only very rich individuals or approved institutions accredited investors or qualified purchasers can participate in it. This regulatory distinction allows hedge funds to take more risk, borrowing levels of money that greatly exceed their assets and avoid many onerous reporting requirements.
These regulatory advantages have allowed hedge funds to consistently outperform stocks and other assets by roughly 2 percentage points each year. The accredited investor rule has mostly been ignored by scholars of inequality.
They have each written persuasively about how the rules contribute to inequality by giving the richest investors privileged access to the best investment strategies. Shadab points out that other countries with less inequality allow retail investors to access hedge funds. They say the share of total wealth of the top 1 percent has increased steadily, from below 25 percent in to 42 percent in The share of total wealth of the top 0. Not everyone slices the data the same way, or draws the same conclusions.
This would challenge the notion that wealth is increasingly concentrating at the top. All three groups saw their income shares and inflation-adjusted incomes peak in , and those shares have yet to recover to those pre—Great Recession levels, he points out. They get their income from very different sources.
They live in different parts of the country. There is a huge amount of diversity, even within a group that we think is small but is actually very big, which is the top 1 percent. When discussing the super-rich, many bring up family dynasties such as the Waltons of Wal-Mart, or the Rockefellers and Koch brothers of energy fortunes.
But who is actually in the 0. Researchers are developing a better understanding of how people in various rungs of the 1 percent make their money. And some research suggests business income plays a big part.
This income is broad-based among the 1 percent. These are talented managers: the researchers find that profits of companies run by these 1 percent-ers are far higher than those of businesses owned by people in the top 5-—10 percent. To reach the top 0. In the top 0. Heim find that one-fifth of the primary taxpayers in the top 0. The latest data used in this study are from , before the —10 financial crisis altered the landscape.
In the rest of the 1 percent, health care is the most represented sector. Since , Forbes has compiled an annual list of the wealthiest Americans, using public information, private interviews, and valuations of comparable assets.
As the rich list comprised households, it represents the top 2. But this small group could control more than a quarter of the income in the 0. Of course, just as incomes vary nationwide, incomes also vary within states. Concentrated pockets of wealth drive up average overall incomes in every state. Here is a look at the richest town in every state. The high average income in the state is due in part to a high concentration of high-wealth individuals. One factor pushing incomes higher in Colorado is likely high educational attainment.
Among adults in the state, Connecticut's wealthiest earners also have the largest tax burden in the country. Retire early: Can ordinary Americans find financial independence and stop work by 50?
Do you plan to retire by 50? As is the case across the U.
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