The recession cost the rich: The share of income received by the top 1 percent dropped to 17 percent in 2009 from 23 percent in 2007, according to federal tax data. The drop alters a figure often emphasized by inequality critics, and it has gone largely unnoticed outside the blogosphere.
WASHINGTON — Hold the condolence cards, but the recession cost the rich.
The share of income received by the top 1 percent — that potent symbol of inequality — dropped to 17 percent in 2009 from 23 percent in 2007, according to federal tax data. Within the group, average income fell by about a third, to $957,000 in 2009 from $1.4 million in 2007.
Analysts say the drop largely reflects the stock-market plunge, and most think top incomes recovered somewhat in 2010, as Wall Street rebounded and corporate profits grew. Still, the drop alters a figure often emphasized by inequality critics, and it has gone largely unnoticed outside the blogosphere.
By focusing on the top 1 percent, the Occupy Wall Street movement has made economic fairness a subject of raucous street protest and ubiquitous political debate.
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In 2009 the average income of the top 1 percent, adjusted for inflation, fell below its 1998 level but remained well above where it was in 1990: $662,000.
While the protests follow the worst downturn since the Great Depression, inequality has been growing for three decades, driven by both economic and political forces.
Globalization created larger markets for those with scarce talents but hurt less educated workers by pitting them against cheap foreign labor. New technology also hurt unskilled workers, by replacing many with machines.
Unions declined, eroding blue-collar bargaining power. The financial industry grew, with paydays heavily weighted toward the top. Corporate culture accepted the growing gap between the executive suite and the factory floor, and pay for chief executives soared.
Falling tax rates on the highest earners added to the divide, by allowing top earners to keep more of their pay and increasing their incentive to maximize it.
In the decades after World War II, by contrast, the average income of the top 1 percent grew only marginally faster than inflation and significantly slower than middle-class incomes. That combination caused inequality to decline throughout much of the 1950s, ’60s and early ’70s.
As recently as 1980, only about one-tenth of the nation’s pretax income went to the top 1 percent. By 2000, that share had grown to about 22 percent.
It slumped to about 18 percent in 2003, after a market crash, only to rebound by 2007 to levels not achieved since the Roaring ’20s.
Critics of the Occupy Wall Street movement say the falling incomes at the top show that concerns about inequality are outdated.
“Get a time machine, Occupy Wall Street,” wrote James Pethokoukis, a blogger at the American Enterprise Institute.
But Jared Bernstein, a former Obama administration official, said that after previous market-related dips, income inequality only soared to new highs.
“If you believed the inequality problem had been solved in the early 2000s, you would have been proven terribly wrong,” said Bernstein, now of the Center on Budget and Policy Priorities.