The economic recovery began to lift the incomes of more typical households in 2015, according to new data published Thursday, in a positive post-financial crisis development that will force Vermont Sen. Bernie Sanders and other populists to update their talking points.
The top 1 percent of income earners saw their share of income rise slightly in 2015, from 21.4 percent to 22 percent, according to the data published by University of California, Berkeley economist Emmanuel Saez, but the 99 percent also saw great income gains.
In fact, income growth for the 99 percent was 3.9 percent in 2015, the single best year since the dotcom bubble year of 1999.
As a result, it’s no longer the case that nearly all of the new income since the financial crisis has accrued to the millionaire and billionaire class, as Sanders, for instance, has claimed based on this dataset.
Instead, Saez wrote in a paper posted on his site, “the recovery from the Great Recession now looks much less lopsided than in previous years,” with the bottom 99 percent recovering nearly two-thirds of the losses suffered in the recession. Top 1 percent families have “captured” just over half of the income gains since 2009, a share that has fallen steeply recent years.
Saez’ study is based on IRS data that better measures the incomes of high earners than the more widely-reported data released by the Census Bureau.
While Saez finds that the bottom 99 percent have been doing better in recent years, he also reports that inequality continued to rise in 2015, at least on the high end. Not only did the income share of the top 1 percent edge up, he finds, the share of income earned by the top 10 percent also rose from 50 percent in 2014 to 50.5 percent in 2015, just short of the record hit in 2012.
Given that both growth and inequality rose in the years after the tax hikes included in the year-end 2012 “fiscal cliff,” Saez concludes that the main effect of the tax increases was to incentivize people to shift income around as much as possible to time it for 2012.
“This suggests that the higher tax rates starting in 2013 will not, by themselves, affect much pre-tax income inequality in the medium-run,” Saez writes.
Saez’ study of income data has been widely credited as a breakthrough by economists. He has worked on the topic with the economist Thomas Piketty, whose book Capital in the Twenty-First Century warning of rising inequality became a surprise best-seller in the U.S. when it was translated into English in 2014.
Other data sources, such as income statistics published by the Congressional Budget Office, show greater income growth for lower-income households than Saez’ database does.
