The Congressional Budget Office released a report yesterday looking at the changes in the distribution of household income from 1979 to 2007. The graph on the very first page tells the whole story: The top 20% has increased its share of the national income at the expense of the other 80%, whose shares have all gone down.
Between 1979 and 2007, incomes grew by 275 percent for the wealthiest 1 percent of households, 37 percent for the middle 60 percent of households, and 18 percent for the poorest 20 percent of households. These figures adjust for inflation and account for the impact of taxes and government transfer payments such as Social Security and unemployment benefits.
In media coverage of this report, I have heard phrases like incomes of the top 1% have ‘doubled’ or ‘almost tripled’. This is wrong. A 275% increase means that they increased by a factor of 3.75, i.e., almost quadrupled!
Kevin Drum comments that what has happened is that “For all practical purposes, every year about $700 billion in income is being sucked directly out of the hands of the poor and the middle class and shoveled into the hands of the rich.”