Half of U.S. workers have incomes below $26,364, yet the average output per worker is $109,000 ---- please explain (see #3 below)
I often show on this site startling economic conditions, like the one above. This week I show four ideas and conditions. 

1.) FDR in 1938 takes on Fascism in the U.S. -- Will Obama?  

2.) The Real Unemployment Rate and the Misery Rate 

         (21.4% and 32.3%)

3.) The Sinking Median Income  ---

       $26,364 or less is the income of half of working America.
             75 million make more, 75 million make less. 

4.) Productivity Gains Over the Years and Middle Income Stagnation 

So much attention to economics in the country, happy days are : 

(Thank you Brian Narelle for the use of your cartoons  -- See his site here.)

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Here are four topics that are relevant to my thinking and their inter-relationship will become clear. 

1.) On April 29, 1938, Franklin Roosevelt addressed Congress about  

"Curbing Monopolies" in which he defines Fascism. 

"Unhappy events abroad have retaught us two simple truths about the liberty of a democratic people.

The first truth is that the liberty of a democracy is not safe if the people tolerate the growth of private power to a point where it becomes stronger than their democratic state itself. That, in its essence, is Fascism—ownership of Government by an individual, by a group, or by any other controlling private power.

The second truth is that the liberty of a democracy is not safe if its business system does not provide employment and produce and distribute goods in such a way as to sustain an acceptable standard of living.

Both lessons hit home.

Among us today a concentration of private power without equal in history is growing.

This concentration is seriously impairing the economic effectiveness of private enterprise as a way of providing employment for labor and capital and as a way of assuring a more equitable distribution of income and earnings among the people of the nation as a whole."

Read more at the American Presidency Project: http://www.presidency.ucsb.edu/ws/index.php?pid=15637#ixzz1c2UDu94B

There are fewer "private sector" workers today than in 2000, 11 years ago. Today there are 109 million, in 2000 there were 110 million. See this Bureau of Labor Statistics reference, and another BLS reference in section 2 just below. The population that makes up the labor force has grown by 33 million people, from 207 million to 240 -- and private sector employers have added a net ZERO new jobs in the past 11 years. This should concern everyone who lives in this country. See below for more about this.

I received the Roosevelt quote from the writings of John Weeks, a Socialist economist from Great Britain. (See the source.)

Wouldn't be pleasant to hear our president speak as FDR spoke, and even more pleasant to live in a country where most people knew what he was talking about?   

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2.)

         

21.3% -- the True Unemployment Rate   

32.2% -- the Misery Rate 

Since 1999 we have added a net zero to the number of private employees in the U.S.A. There were 109 million private sector workers in 1999, and there are still 109 million private sector workers in 2011 --- 12 years and no growth in the private employment sector. View the data here:

http://data.bls.gov/pdq/SurveyOutputServlet)

Since 1999 the population of potential workers -- everyone above 16 years old -- has grown by 33 million or by 16%, from 207 million to 240 million. Let us suppose that the labor force would have grown at the same rate as the working population. Then today there would be 20.5 million additional workers participating in the job market. But in fact the labor force participation number grew by only 15 million. Some 5.5 million workers are missing, people who chose not to enter the labor force. They are not counted in any BLS figures of unemployment or underemployment. That is an additional 3.2% added to the unemployment rate of 9.1%, or a total of 12.3% unemployed. 

(See BLS figures at http://www.bls.gov/cps/cpsaat1.pdf 

To that you can add the discouraged workers and the under-employed workers, an additional 9.3% to the 12.1%, for a total of 21.4% true unemployment. (See njfac.org/jobnews.html)

And that's not all. Add the additional 10.9% who work full-time and year-round in jobs that pay less than the official poverty rate for a family of four. Then you find that 32.3% of working America are either 1) out of work, 2) can find only part-time work and want full-time, 3) have dropped out of the job market, or 4) have a lousy paying job. Find the figures for all these under- and unemployed here. 

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3.)
Distribution Figures 

$47,000 --- The economy generates over $47,000 of output per citizen, man, woman, child, and elderly person --- over $47,000 per capita. 

$109,000 --- It generates over $109,000 of output per worker (see http://www.frbsf.org/csip/data/charts/chart17b.cfm). 

$26,364 --- But the median wage, according to a very recent report by the Social Security Administration is now $26,364. See the David Cay Johnson article . The net compensation for all 150.4 million payroll stubs is $6 trillion, which averages $40,000 per worker ($39,959.30 to quote the SSA exactly). This figure includes only what is reported on the W-2 paycheck statement, and does not include compensation from capital gains and business income, about 18% of all income. Nor does it report pension income, nor government transfers such as Earned Income Tax Credit or Temporary Aid to Needy Families. This is pre-tax income for wage earners. The figures on wages are "awful" according to Johnson. Worse than last year. 

The Citizens for Tax Justice site reports a mean average income at $68,900 for 2009. The U.S. Census reports a mean average income for 153 million individuals as $42,466. The reports are widely different. I expect that the U.S. Census just does not capture all income in their figures. The CTJ figure may include more income from the very highest 1% of earners, driving $42,466 to $68,900. U. C. Berkeley professor Emmanuel Saez reported that 23.5% of all income went to the top 1% in 2007, exceeding the pre-tax income of 60% of households. Another problem is an explanation for the low median figure of $26,362. One conjecture is that pension income may be very large, driving upwards the mean average, separating the $26,362 median from the $42,466 mean. The questions abound, and they are important because, in the words of professor Robert Wade, "I have suggested, first that the West is likely to experience several more years of slow and erratic growth; and second, that another big financial crisis within a decde is quite possible. . . . The second prediction rests on the failure to push through reforms to finance that would stamp on the practices that produced the current crisis, and to change the incentive structure facing the banks, with its built-in bias toward moral hazard. It also rests on factor beyond the financial sector. The latter high top-end income and wealth inequality."

"Anyone who wants to understand the enduring nature of Occupy Wall Street and similar protests across the country need only look at the first official data on 2010 paychecks, which the U.S. government posted on the Internet on Wednesday," says Johnson. 

The Tax Policy Center generated a breakdown of income, its sources and distribution, in 2006.  The State of Working America, 2006/2007, published it on page 79. The lower-earning 80% of households received 40.0% of all pre-tax income, the top-earning 20% received 60.3% (as you can easily see if you link to the table). 

This is pre-tax income. I made a point to calculate the fraction of total income that the lower-earning 80% received through wages and salaries: it was 28.2% of total 100% of personal income. About 80% of the work force are non-supervisory workers. 28.2% is their labor-reward share of all income that our economy produces. The labor-reward share for the top 20% is 36.3% of total income, 8.1% higher than all 80%'s share. The lower-80% receive 11.8% of their income from pension and other sources. 

Using the Tax Policy Center's numbers, for every $1 of income received by the lower 80%, $6 of income are received by the top-earning 20% of households. (When 40 is divided by 80, each receives 0.5, and when 20 is divided 60, each receives 3.0. The ratio is 1 to 6.) The figures from David Cay Johnson are alarming, but not as alarming as the Tax Policy Center. The Johnson figures do not include the capital and business income that goes almost entirely to the top 20%, mostly the top-most 5% who own 72% of all financial assets.   

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See the report by Citizens for Tax Justice on overall effective tax rates. You will find average incomes for each 20% grouping and the overall tax bite each income group pays effectively or actually, not just the nominal rate.   

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4.)

Workers Produce More, But Wages Stagnate 

What would be the median worker's income if wages had matched productivity? Les Leopold writing at Alternet, 10/23/11, gives his best analytical guess: 

I calculate that the median would have risen from $31,824 to $61,360. That's about  double.  Imagine your neighbor has a normal job, but he earns $60,000 instead of $30,000. It is possible even still. See my February essay. Read  this link to the chapter "What Should Be Done: A New Deal for the Middle Class" in Aftershock by Robert Reich. Les Leopold uses weekly wages to find the median, not annual median as David Cay Johnson reports from the Social Security Administration. Thanks, Les. 

The same graph but done by the Economic Policy Institute at their site State of Working America looks like this:


The median compensation increased by about 15% and productivity increased by 92%. Using the Social Security Administration figure for median income, $26,364 in 2010, then the median would increase by 77% to $46,600. Half of 150 million workers would earn less than $46,600.

And finally, the Congressional Budget Office presented their study last week that showed the changes in the sizes of the income-pie-slice received by different income groups. Their graph shows the top one percent getting most if not all the economy's increase, while the other income quintiles shrunk in relative size. Note: "After Transfers and Federal Taxes". That would be transfers like welfare and Earned Income Tax Credits.



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Now, why do I do all this calculating? The same reason people are sleeping outside at the Occupy sites. The economic arrangements are perverted. On top of this we send about $1.4 billion a day over seas to our commercial foreign trade partners. For four years it was over $2 billion a day. The wages for manufacturing labor in China is reported by the Department of Labor, Monthly Labor Review, March 2011, to be $1.36 an hour, and in the U.S. it's $34 an hour. We have an uphill fight to stabilize our median income. I think the population should respond intelligently by viewing the facts as clearly as they possibly can. That's why I write. 

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Dollars and Sense Magazine published an article that summarizes our problems and presents solutions that match what I have presented on this blog. The author is Katherine Sciacchitano in the September/October 2011 issue. This is a short quote: "It took the New Deal to get the economy growing. From 1933 through the end of the Depression, GDP rose and fell with government spending. By 1936 unemployment had fallen from 23% to 9%."

How could unemployment fall so rapidly? Answer: public job creation. SeeRutgers  University professor Philip Harvey's solution and follow the campaign at the Full Employment web page.
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THIS BLOG: My February 2011 essay, the Six Point Program, is a comprehensive proposal to restore prosperity. I recommend it. Go the the column at the right, click-on February, 2011. Look for the Contents page also, December of 2010. We can do two major things in this nation: we can make sure all jobs pay a decent wage -- they don't, believe me --- and democratically we can create jobs for everyone.

                            

A Very Short Course in the U.S. Economy 

Often while talking on the phone to a friend I realize that he or she has a very sketchy concept of the economy and how to solve its problems. So I have put together some quick graphics, about 7 of them from web pages, with a short narrative connecting the story, plus some solutions. The reader can flip through the pages and graphs, and come out with an improved vista._________________________________

Photo originates here: New Deal 2.0, a good source. 
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(Note: On October 15, 2011 my friend sent me a link to an article that is better than my summary here. 
The title is "Here's What the Wall Street Protesters Are So Angry About . . ." Be sure to also read that article.) 
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The general picture is that we've gone through several decades of growing income and wealth disparity while at the same time degrading the structure of the economy. We may never recover --- I would not joke about it --- and if we do we'll have to make some big changes. It's all here in a flash. 

1.) Income disparity

What has been the economy's problem? A look at three graphs explains the inequality problem. The first and second show changes in income distribution 1979 to 2007; the third shows changes in wealth distribution, 1983 to 2009. 

This comes from the Economic Policy Institute, a report by Lawrence Mishel and Josh Bivens, Oct 26, 2011. See the entire article here. 

The next graph on income gains comes from Jared Bernstein's blog, titled ""The Policy Backdrop of Inequality and It Implications for 'Class Warfare'". His source is the Congressional Budget Office.

Imagine a pie cut into five pieces each representing the amount of income distributed to the five groups of 20% households. Over time the pieces get bigger and/or smaller.  The top 20% piece is sub-divided. The top-earning 1% fared well over the past decades, their piece of pie grew from 7.5% to 17.1% (post-tax). The sizes of all four lower-earning 20% groups, representing 80% of the population, shrunk. That is the gist of this graph. It fails to show the relative sizes before or after the comparison, showing only the changes. According to the Tax Policy Center, the sizes (of the "income pie") per each 20 percentile household group in 2006 was 2.5%, 6.4%, 11.4%, 19.8% and 60.3% for the incomes of the five quintiles of households. This is pre-tax income. The top 20% received 60.3%. See my other essay previous to this one for similar comparisons. The income to the top 1% was approximately equal to the combined incomes of the lower-earning 60% of households.
See the Tax Policy Center for actual figures.

2. Wealth Disparity
Top 20% = yellow
Bottom 20% = not visible or 0.1%
20% to 40% = not visible or 0.2%
40% to 60% = 4%
60% to 80% = 11%                               (Source PBS News Hour)

For a full report on wealth see State of Working America's Wealth. 
The graph on household wealth gains, 1983 to 2007, shows the same picture. It derives from Lawrence Mishel at the Economic Policy Intitute, September 15, 2011. The bottom 60% of households have lost savings since 1983. This is consistent with U.C. Berkeley professor Sylvia Allegretto's study that showed the bottom 80% of households on average lost 40% of their savings between 2007-2009. 

Once again, the pie chart showing wealth distribution is missing. But here are some aids. State of Working America's Wealth, a 2011 report by U.C. Berkeley professor Sylvia Allegretto, pages 4 and 5, shows the relative sizes. The lower-wealth-holding 60% own a mere 2.2% of the total wealth. 
Mother Jones magazine ran an article, "It's the Inequality, Stupid" in March/April 2011. Check out the graphs. 

Combine this with the knowledge that the GDP/capita (the economic output per citizen) in the nation has more than doubled (an increase of 100%) since 1963, while the typical family or household's income has increased by 22% from 1967 to 2003. The economy more than doubled, the typical household saw income rising by a quarter. The St. Louis Federal Reserve Bank provides the first graph showing an amazing increase in output per human being. The next graph, from the U.S. Census, shows a less amazing  distribution of output where the median household barely grows its income. 

Real GDP per Capita in the United States (USARGDPC)

Edit Graph    Print    PDF    Save

 The majority of Americans did not experience the full benefits of a growing economy, in fact in our present decline, a majority are seeing declines in wealth back to levels of 1983, while income has not budged for individuals since the mid 1970s.

Now, if you are interested in learning about the recent recession, you can catch many graphs at this site, "The Legacy of the Great Recession" at Center for Budget and Policy Priorities. But you might skip that to avoid overload. But if you crave overload, look at Inequality.org, part of Demos.org. 

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What is the solution:

Public Employment

Public employment worked in the 1930s and '40s, it may be our last hope to end the epidemic of unemployment and underemployment. About 30% of workers, or 45 million, are either out of work (9.2%), under-employed (5.8%), discouraged and dropped out (4.2%), or working full-time year-round for below poverty level wages (10.9%). It is a sick economy. 

There are plans to create public jobs, professor Philip Harvey, Rutgers University, published on at Demos.org in January 2011, "Back to Work". 

On page 11, Table 3, you'll see Harvey's plan would create 1,000,000 jobs plus 414,000 additional private sector jobs for a net cost of $28.6 billion. Harvey states, page 12, "We currently need about 8.2 million more jobs to reduce the nation's unemployment rate to 4.5%. Creating that many jobs in a program like the one described in Table 3 would require a net increase in federal spending of about $235 billion during the first year of the JLRS initiative. If the Bush-era tax cuts had been allowed to expire at the end of 2010, the federal government would have collected about $295 billion in additional revenue during 2011." I recommend readers look at the graph on page 2 and the table on page 11. 

Marshall Auerback at New Deal 2.0 writes (in The Real Lesson from the Great Depression) that the "Roosevelt administration reduced unemployment from 25 per cent in 1933 to 9.6% per cent in 1936, up to 13 per cent in 1938 (due largely to a reversal of the fiscal activism which had characterized FDR’s first term in office), back to less than 1 per cent by the time the U.S. was plunged into the Second World War at the end of 1941."

There is no reason to review Auerback's essay in a very "short course", but you will be interested to know that the public jobs program built real structures, "It also built or renovated 2,500 hospitals, 45,000 schools, 13,000 parks and playgrounds, 7,800 bridges, 700,000 miles of roads, and a thousand airfields. And it employed 50,000 teachers, rebuilt the country’s entire rural school system, and hired 3,000 writers, musicians, sculptors and painters, including Willem de Kooning and Jackson Pollock. So much for the notion that government jobs are not “real jobs”, as we hear persistently from critics of the New Deal!"

Restore Manufacturing

And finally look at Ron Baiman's essay of September 7, 2011, "What We Need to Do to Revive the Economy". He states that government spending is not enough to revive the economy, it needs restructuring. "In the absence of restructuring there is no magic date in the future after which point the economy will be able to grow without public or private deficits.5

The need for fundamental restructuring to revive our economy makes our current downturn more like a "Depression" than a "Recession".  . . . The U.S. economy suffers from major macroeconomic imbalances and a three decade loss of productive capacity that cannot be corrected by a decade long spree of public infrastructure spending (though this would certainly help in the short-term and the long- term)."  

He further states, 

"We don't need to "shrink the size of the public sector" ([which is] what the real underlying "deficit" debate is all about about). Rather, we need to dramatically increase it. We need to vastly expand our taxing and spending in order to reorient our economy away from a rentier [finance dominated] and back to a productive [manufacturing] and balanced advanced economy configuration by enacting a massive federal jobs program that will expand public and private sector employment in: a) social services, b) infrastructure, c) new green technologies (CPEG 2009, 2011). We desperately need a new New Deal."

The graphs on unemployment, page 3, and the conclusion beginning on page 5 are very instructive. 

Also look at the articles at New Deal 2.0 by William Lazonick and John Rynn dealing with restoring manufacturing industry to the U.S. 

At this point you might try my essay, February 2011, in which I try to offer 6 or 7 indispensable changes needed. It's a "basic solutions" essay. 

In Short

There is no happy ending. It is a royal mess. 

The economy should not serve only those who seek fabulous fortune. Greed has perverted the society. What if the GDP/capita graph (from the St. Louis FRB) that showed 100% growth between 1963 and 2007 had matched the median household income graph? And what if the other wealth and income graphs had even growth for all income sectors? And why shouldn't they? Between 1947 and 1979 those graphs did match; there was even growth for all income sectors. 



In Contrast, the years since 1979 are starkly different:

Source: U.S. Census Bureau, Historical Income Tables: Families, Table F-3 (for income changes) and Table F-1 (for income ranges in 2009 dollars).

These two graphs come from Inequality.org, and originate at the  Economic Policy Institute. The EPI created a web page called State of Working America.

See this interactive graph at State of Working America, and compare the share for the bottom 90% before and after 1969. You will notice as you swing the pointer pre-1969 that the blue sector is visible, indicating the 90% of households made income gains. What do you see when you swing the pointer post-1969?  We had growth for all sectors 1947 - 1979, but the top earners still captured half or more the growth. The income tax bracket was over 90% on income above $200,000 from 1951 to 1964. (See this table.) Or we could just establish a maximum wage set at 20 times the median household income. There are plenty of solutions for curbing inequality. 

Ben Leet  

You finished this session. Now go to the next:
THIS BLOG: My February 2011 essay, the Six Point Program, is a comprehensive proposal to restore prosperity. I recommend it. Go the the column at the right, click-on February, 2011. Look for the Contents page also, December of 2010. We can do two major things in this nation: we can make sure all jobs pay a decent wage -- they don't, believe me --- and democratically we can create jobs for everyone.
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I left this comment to the article I cited above, "Here's What the Wall Street Protesters Are So Angry About . . ." Here it is:

Excellent. Add this: 40% of the savings of the typical family (the median household) were lost between 2007-2009, their savings dropped from $105,000 to $65,000, down to savings level below 1983 levels. This is according to Sylvia Allegretto, U.C. Berkeley professor, writing in State of Working America's Wealth. The wealthiest 1% own 225 times more than the "typical" or median family. 1 in 4 households have "zero or negative" net worth (savings) and another 1/8 have less than $12,500. Our economy generates over $47,000 per year yet 15% of the population lives in poverty. The St. Louis Fed also has a chart showing that the average worker contributes over $100,000 yearly in output to the economy, but the median income is around $30,000.  And the National Bureau of Economic Research conducted a survey and half the adults said they would not be able to handle a $2,000 emergency within 30 days without borrowing or selling something. And add that about 30% of the young people below 18 years old get their food from the Food Stamp program. The economy is a mess. The Labor Department reports that manufacturing workers in China earn $1.36 an hour, and in the U.S. $34 an hour or about $70,000 a year. This is why 1/3rd of U.S. manufacturing jobs were lost in the past ten years. In fact, in the year 2000 the economy had more private sector employment, 110 million workers, than today in 2011, 109 million workers. Protest or lose what little you have. Excellent report. See my blog, http://benL8.blogspot.com for more. Excellent report here. 

This photo credits: http://www.socialistproject.ca/bullet/553.php -- a good source of socialist thought.

If 80% earned $1 dollar, what would the top 1% earn?

A New Look at Inequality of Income

Data comes from U.C. Professor Emmanuel Saez, "Striking It Richer". Year is 2008.

Contrast this with the figures from the Citizens for Tax Justice report "All Americans Pay Taxes".

Top 1% received average (pre-tax) income of $1,328,000 in 2009. 

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If Income Were Distributed at 1970 Ratios, 

Instead of 2007 Ratios: 

80% of households would have $15,000 more income. 

The Tax Policy Center lists the percentage of income received by different percentiles of households.

In 1970 the highest ten percent of households received 30.5%, in 2007 it received 42.0%. 63.6%  of the all income increase went to the top 10% (see the graph below). The figures from the E. Saez report show an increase, 1980 to 2007, of the top 10% households from 35% to almost 50%. Using the Tax Policy Center figures, the annual incomes of all of the lower 80% of households, about 90 million households, would rise by around $15,000, the median rising from $49,000 to $64,000, with the same distribution as in 1970.  The lowest-earning 20% of households would average not $12,000 but $27,000 a year; the next income quintile's income would be not $25,000 but $40,000 a year on average. And so on.  This is using the averages from the Citizens for Tax Justice report, cited above. The total incomes for the Citizens for Tax Justice report are confusingly low. The median household income from the U.S. Census is around $50,000 a year. But the distribution ratio change is not confusing. 

The Economic Policy Institute would disagree with my figure of $15,000 more for every family. Their chart shows an increase of $9,220 for the median, instead of my $15,000. I took the ratio of distribution from 1970 and applied it to 2011. Assume that the ratio had not changed since 1970, and you can also assume that the growth rate would have increased. But then you have to understand how inequality drags on growth by suppressing aggregate demand.

Or check out State of Working America, their section on income inequality. This is their graph:

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Comparing the 1% to other earnings' groups 

A nutshell explanation:
If the lowest-earning 60% of U.S. households (almost 68 million households) in 2006 earned on average $1, then the next 39% of higher-earning households earned on average $4.65, and the top 1% earned over $54.40.

Or the lower-earning 80% (92 million households) earned on average $1, the next 19% earned on average $4.38, and the top 1% earned $36.80.

Or the lower-earning 99% (113 million households) earned on average $1 while the top 1% earned $22.32.

Where did I get these figures? See Citizens for Tax Justice, All Americans Pay Taxes, April 2010.

See also their report from 2009, Is Tax Day Too Burdensome for the Rich. Only recently did I find the more recent 2010 report. These pages show the effective overall tax burdens for all income sectors, that is, the total taxes paid to all government agencies (not just federal income tax) and the real rate as a percentage of actual income. The wealthiest pay 30%, the lower-earning 80% pay 24%, roughly. The higher-earning 1/5th who receive almost $6 dollars of income to every $1 dollar of income for the lower 80%, pay a rate of 30%, while the lower 80% pay an "effective overall" rate of 24%.

The income distribution data matches data from the Tax Policy Center, and from the Tax Foundation (see Table 5), if you are really curious. In 2008 the Tax Foundation reports that 67.38% of all pre-tax income went to the top 25%. The Tax Policy Center reports in 2006 that the top 20% received 60.3%. Roughly the same ratios as the Citizens for Tax Justice.

Since the We Are the 99% and Occupy Wall Street have become movements they might show that while each household in the bottom 99% get $1 dollar of income --- the top 1% get almost $24. The average income for the bottom 99% is $56,200, the top 1% average is $1,328,000. This is a ratio of $1 to $23.62.

The Math of Comparing

If 60 receive $1 each, or 20.3% of the total, their share of total income is $60.

Then 39 receives $4.65 each, this is 61.3% of the total, or $181.35.

Then 1 receives $54.44, or 18.4% of the total, or $54.44.

There are 100 participants, they receive 100% of all income, and total income amounts to $295.79. The average income ratio is 1 to 4.65 to 54.44.

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If 80 receive $1 each, or 40% of the total income, their share of the total income is $80.

Then 19 receive $4.38 each, this is 41.6% of the total, or $83.20 total income.

Then 1 receives $36.80, equal to 18.4% of the total, or $36.80 total income.

There are therefore 100 participants, they receive 100% of all income, and total income amounts to $200. The average income ratio is 1 to 4.38 to 36.80.

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Tax Policy Center
The lower-earning 80% of households received 28.2% of the nation's income from wages and salaries.

A part of the Brookings-Urban Institute, the Tax Policy Center is deep into the numbers. This report was subsequently published in State of Working America, 2006-2007, page 79. The note on page 79 states, "Source: Author's analysis of Urban-Brookings Tax Policy Center Microsimulation Model (version 0305-3A)." See these reports from the Tax Policy Center.

The distribution amounts for all 5 quintiles, from lowest to top, are 2.5%, 6.4%, 11.4%, 19.8%, and 60.3%. This is pre-tax income. The top one percent received 18.4% of total income (a portion of the 60.3%), an amount almost equal to the bottom 60% which received 20.3%. Professor Emmanuel Saez of U.C. Berkeley publishes a similar description in his report "Striking It Richer" and the Citizens for Tax Justice also publish a similar distribution, and if one were to look at the Joint Committee on Taxation or at the Tax Foundation one would find two other similar descriptions.

A disproportionate distribution amounts to leakage, a hole, in the economy. What escapes? Aggregate demand that would circulate and create jobs and incomes.

These are pre-tax income percentages. Looking at the overall effective tax rates for all income deciles, available at Citizens for Tax Justice (see link above), a subsidiary of the Institute on Taxation and Economic Policy (http://www.ctj.org/pdf/taxday2009.pdf) we note that the top one percent paid 30.9% in taxes, the 80th to the 99th percentiles paid from 31.5% to 32.2% in taxes, and the bottom 80% paid on average 24.5% in taxes. (Overall means "to all government agencies, federal, state and local" and effective means "as a percentage of income")  Post-tax distribution ratios are roughly similar to pre-tax distribution ratios. From the report: "The total federal, state and local effective tax rate for the richest one percent of Americans (30.9 percent) is only slightly higher than the average effective tax rate for the remaining 99 percent of Americans (29.4 percent)."

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Looking at the Citizens for Tax Justice figures (2009) for average income, the average income for the bottom 99% of households is 4% for the average of the top 1% ($55,600 to $1,445,000). That's a ratio of 1 to 25. When I plug in the ratios from the Brookings-Urban Institute, 99 receive $1, and 1% receives $22.32. It's sixth grade math, and I won't explain how I did it. I was a fifth grade teacher, and that's why I haven't forgotten my arithmetic.

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If we use the pre-tax income percentages reported by U.C. Berkeley professor Emmanuel Saez for 2007, the top one percent received 23.7% of total income, not the 18.4% reported by the Tax Policy Center.
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This graph comes from Inequality.org, see "income -- inequality".


Source: Congressional Budget Office, Average Federal Taxes by Income Group, “Average After-Tax Household Income,” June, 2010._______________________________________________________________

Want to see it again? This time it's better. The source is an article at New Deal 2.0.

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The United Nations Human Development Report lists the Gini coefficient for the U.S. at 40.8 in 2010. This measure of inequality places the U.S. last among developed nations.
Among the top 50 nations in human development the U.S. ranks 44th in "Income Gini coefficient."
Among the top 30 the U.S. ranks 28th.
(UNHDI, 2010, page 152  ---  http://hdr.undp.org/en/media/HDR_2010_EN_Complete_reprint.pdf  )

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Only recently the director of Economic Policy Institute, Lawrence Mishel, published a report titled "Huge disparity in share of total wealth gain since 1983", September 15, 2011.
http://www.epi.org/publication/large-disparity-share-total-wealth-gain/
In the 26 year period 1983 to 2009 the top five percentiles received 81.7% of wealth gain. The lower 80% of households had a net loss in wealth. See the report. The top 1% gained $4.5 million per household, the next 4% gained $1.2 million per household, the bottom 60% lost wealth. This is also consistent with Sylvia Allegretto's report, State of Working America's Wealth, May 2011. This is indicative of the distribution of annual income over time.

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See the article in Dollars and Sense magazine, July-August 2011, by James Cypher "Nearly $2 Trillion Purloined from U.S. Workers in 2009". The top earning households "pocketed . . . an estimated $1.91 trillion that 40 years ago would have collectively gone to non-supervisory and production workers in the form of higher wages and benefits." Some 88 million workers would share $1.91 trillion or on average $23,875 per household. This would raise the median among the lower-earning 80% of  households by 66%, from $36,000 a year to $60,000. See http://www.dollarsandsense.org/archives/2011/0711cypher.html

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I left this comment on an article at New Deal 2.0 October 18, 2011.

Our economy generates over $47,000 of output per human being, all 312 million Americans, per year, but the median income for all workers, over 150 million (including part-time workers), is around $30,000/year. Half make less than $30,000. U.S. income distribution Gini coefficient is the lowest among the developed (industrial) nations, maybe it's #73 worldwide. The average personal income I think is around $82,000 a year. The St. Louis Fed Reserve has a graph showing average output per worker is $100,000 per year. Recently the share of income going to wages has dropped. 30% of the workforce is either out of work (9.2%), working part-time involuntarily or discouraged (8%), or working full-time for below poverty level wages (10%). And if you include the drop in labor force participation since 2000, it's even worse. I got those figure from njfac.org, the unemployment numbers. I might mention, 28.2% of all personal income is the amount received by the lower-earning 80% as wages and salaries, see State of Working America, 2006/2007, page 79. About 20 miles south of San Diego, California, the minimum wage is $4.50 a day, and 60% of Mexican workers earn less than 3 times $4.50, or $13.50 a day. In China the manufacturing workers get $1.36 an hour, or under $3,000 a year. In the U.S. manufacturing jobs pay about $34 an hour, almost $70,000 a year. The rules of the economy, the laws, should serve the majority who live under those rules. The top one percent earn almost the same as the lower-earning 60%, see http://www.ctj.org/pdf/taxday2010.pdf. Beth Shulman and Paul Osterman deserve our attention.