Graph of the Day: Income Share of Top 0.1 Percent of US Population, 1940-2008

During the 20th century, the United States experienced two major trends in income distribution. The first, termed the “Great Compression” by economists Claudia Goldin of Harvard and Robert Margo of Boston University, was egalitarian.* From 1940 to 1973, incomes became more equal. The share taken by the very richest Americans (i.e., the top 1 percent and the top 0.1 percent) shrank. The second trend, termed the “Great Divergence” by economist Paul Krugman of Princeton (and the New York Times op-ed page), was inegalitarian. From 1979 to the present, incomes have become less equal. The share taken by the very richest Americans increased. Income gains made during the Great Divergence by the top 20 percent relative to the middle and bottom 20 percent pale in comparison to income gains made during that period by the top 1 percent relative to the bottom 99 percent—especially after 1994. Since 1979, the top 1 percent’s income share has more than doubled. Now let’s look at the top 0.1 percent. If the top 1 percent are the Rich, the top 0.1 percent (who today earn about $1 million or more) are the Stinking Rich. Since 1979, their income share hasn’t doubled; it’s quadrupled. In 1973 the top 0.1 percent’s share of the national income stood at 2 percent. By 2008 it was 8 percent. The bottom 99.9 percent’s share fell from 98 percent to 92 percent. Source: Thomas Piketty and Emmanuel Saez. Chart by Catherine Mulbrandon of www.VisualizingEconomics.com.

The Great Divergence in Pictures: A Visual guide to Income Inequality