Wages for top earners soared in 2014: Fly top 0.1 percent, fly

After dipping slightly in 2013, annual earnings of the top 1.0 percent of wages earners grew 4.9 percent in 2014, and the top 0.1 percent’s earnings grew 8.9 percent, according to our analysis of the latest Social Security Administration wage data. This analysis provides the first look at the likely trend of the household incomes of the top 1.0 percent. The top 1.0 percent’s earnings have nearly returned to their previous high point, attained in 2007. In fact, the earnings of workers between the 99th and 99.9th percentiles have reached their highest level of all time—it’s only the earnings of the top 0.1 percent that are still below 2007 levels. The top 5.0 percent has also reached its highest level of earnings ever.

Surprisingly, wages of the top 1.0 percent declined in 2013, while those of the bottom 99.0 percent grew. We hypothesized that this decline in top earnings might reflect income shifting, as a new, higher top bracket—39.6 percent—and an additional 0.9 percent Medicare tax on high earners provided incentives to shift compensation into 2012 (when top 1.0 percent wages grew 6.1 percent). It looks like we were right. The strong growth of earnings at the top in 2014 suggests that the highest earners have found their mojo once again. In the analysis below we review these recent trends, as well as trends during the Great Recession and over the longer-term.

Wage growth from 2013 to 2014

The table below shows that annual earnings for the bottom 90 percent of earners rose 1.4 percent in 2014, to $33,297—just $20 above their 2007 level. Given that hourly wages were stagnant or falling throughout the wage scale in 2014, this growth in annual wages must have been due to an increase in hours worked per worker. Workers between the 90th and 95th percentiles of wages (averaging about $110,000 in 2014) saw wage growth comparable to that of the bottom 90 percent (1.3 percent) and the earnings of workers between the 95th and 99th percentile grew 1.9 percent. Among the 1.0 percent, earnings for the top 0.1 percent grew the strongest (8.9 percent), while those just beneath them—the next 0.9 percent—had a slower 2.6 percent earnings growth.

Table 1

Change in annual wages, by wage group, 1979–2014

Percent change Percent change
Average annual wages (2014 dollars)  Long-term Great Recession
Wage group 1979 2007 2009 2013 2014 1979–2007 1979–2014 2007–09 2009–14 2013–14 2007–14
Bottom 90% $28,524 $33,277 $33,077 $32,851 $33,297 16.7% 16.7% -0.6% 0.7% 1.4% 0.1%
Top 90th to 99th $93,295 $135,584 $135,242 $139,014 $141,293 45.3% 51.4% -0.3% 4.5% 1.6% 4.2%
90%-95% $79,113 $106,063 $107,065 $108,543 $109,923 34.1% 38.9% 0.9% 2.7% 1.3% 3.6%
95%-99% $111,023 $172,484 $170,464 $177,103 $180,505 55.4% 62.6% -1.2% 5.9% 1.9% 4.7%
Upper 5% $142,639 $275,862 $252,719 $269,585 $278,616 93.4% 95.3% -8.4% 10.2% 3.3% 1.0%
Upper 1% $269,102 $689,373 $581,738 $639,514 $671,061 156.2% 149.4% -15.6% 15.4% 4.9% -2.7%
99.0%–99.9% $232,421 $458,049 $418,939 $451,166 $463,072 97.1% 99.2% -8.5% 10.5% 2.6% 1.1%
99.9% -100% $599,230 $2,771,290 $2,046,933 $2,334,653 $2,542,965 362.5% 324.4% -26.1% 24.2% 8.9% -8.2%
Average $36,763 $49,045 $47,759 $48,473 $49,395 33.4% 34.4% -2.6% 3.4% 1.9% 0.7%

Source: EPI analysis of Kopczuk, Saez and Song (2010) and Social Security Administration wage statistics

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Wage growth in the Great Recession and recovery

Wage levels for everyone except the top 0.1 percent have returned to where they were before the Great Recession in 2007. Those in the bottom 90 percent, as discussed above, earned just $20 more in 2014 than in 2007—essentially stagnant growth over the last seven years. Those just above, in the 90 to 95th percentiles earned 3.6 percent more in 2014 than in 2007, while those in the 95th to 99th percentiles earned 4.7 percent more. The wages of the top 1.0 percent took the biggest fall in the 2007-09 downturn and therefore have had the most ground to regain.. Because the top 0.1 percent earned 8.2 percent less than their 2007 levels, the top 1.0 percent were still 2.7 percent below 2007 in 2014. Both the top 5.0 percent as a whole and the 99.0 to 99.9th percentiles achieved higher earnings in 2014 than in 2007 and, as mentioned above, now have their highest earnings levels ever.

Figure A

Cumulative percent change in real annual wages, by wage group, 1979–2014

Year Bottom 90% 90th–95th 95th–99th Top 1%
1979 0.0% 0.0% 0.0% 0.0%
1980 -2.2% -1.3% -0.2% 3.4%
1981 -2.6% -1.1% -0.1% 3.1%
1982 -3.9% -0.9% 2.2% 9.5%
1983 -3.7% 0.7% 3.6% 13.6%
1984 -1.8% 2.5% 6.0% 20.7%
1985 -1.0% 4.0% 8.1% 23.0%
1986 1.1% 6.4% 12.5% 32.6%
1987 2.1% 7.4% 15.0% 53.5%
1988 2.2% 8.2% 18.4% 68.7%
1989 1.8% 8.1% 18.2% 63.3%
1990 1.1% 7.1% 16.5% 64.8%
1991 0.0% 6.9% 15.5% 53.6%
1992 1.5% 9.0% 19.2% 74.3%
1993 0.9% 9.2% 20.6% 67.9%
1994 2.0% 11.2% 21.0% 63.4%
1995 2.8% 12.2% 24.1% 70.2%
1996 4.1% 13.6% 27.0% 79.0%
1997 7.0% 16.9% 32.3% 100.6%
1998 11.0% 21.3% 38.2% 113.1%
1999 13.2% 25.0% 42.9% 129.7%
2000 15.3% 26.8% 48.0% 144.8%
2001 15.7% 29.0% 46.4% 130.4%
2002 15.6% 29.0% 43.2% 109.3%
2003 15.7% 30.3% 44.9% 113.9%
2004 15.6% 30.8% 47.1% 127.2%
2005 15.0% 30.8% 48.7% 135.3%
2006 15.7% 32.5% 52.1% 143.4%
2007 16.7% 34.1% 55.4% 156.2%
2008 16.0% 34.2% 53.8% 137.5%
2009 16.0% 35.3% 53.5% 116.2%
2010 15.2% 35.7% 55.7% 130.9%
2011 14.6% 36.2% 56.9% 134.1%
2012 14.7% 36.4% 58.4% 148.5%
2013 15.2% 37.2% 59.5% 137.6%
2014 16.7% 38.9% 62.6% 149.4% 
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Source: EPI analysis of Kopczuk, Saez, and Song (2010, Table A3) and Social Security Administration wage statistics

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Unequal wage growth since 1979

As you can see in the figure above, the longer-term trends show tremendous disparity in wage growth. Wages of the top 1.0 percent rose 149.4 percent from 1979 to 2014, while the top 0.1 percent—the very highest earners—had earnings grow at least twice as quickly, up 324.4 percent since 1979. Higher wage earners below the top 1.0 percent saw their wages grow between 38.9 percent (90th to 95th percentiles) and 62.6 percent (95th to 99th   percentiles) from 1979 to 2014. Productivity (net of depreciation) grew 62.7 percent from 1979 to 2014 so the only groups whose wages matched that growth were the top 1.0 and top 0.1 percent. The annual earnings of the bottom 90 percent rose just 16.7 percent from 1979 to 2014, but grew by only 1.0 percent since broad-based earnings stagnation began in 2002. In contrast, the wages of the top 1.0 percent grew 19.2 percent from 2002 until 2014.


  • Steve Wood

    This is great visual aid for those spreading the word about income inequality in America. My only suggestion would be to promote it better. In my opinion, this is front page news.

  • Captain_Ormsby

    In 2012, the world’s richest 100 people earned enough money in that one single year to end extreme poverty 4 times over.

    “How will we pay for Sanders’ policies?”

    It’s not hard to see that the extremely wealthy have plenty of scope to be taxed far more heavily than they currently are while still providing them plenty of freedom to buy mega-yachts and fleets of Ferraris. I don’t think success and wealth are bad things, but there does come a point of taking the pi$$

    • BrookD

      There are a number of ways to pay for Sanders’ policies which may well be to your benefit and most of which Sanders supports. Possibilities: A very small tax on financial transactions which will also decrease instability in the market, increasing the wage level that is taxable under Social Security, bringing home the billions of dollars that are stored in the Cayman and other offshore accounts, raising corporate income to previous levels, incentivizing things that benefit the public (E.g.,not oil or nukes, but green energy and many other examples) and finally, the big one, protecting ourselves from exorbitant military expenditures while still providing security. This could involve closer monitoring of military weapons that are unproductive and more efforts to prevent overcharging for small parts, take a better leadership role in the UN and use it to proactively monitor causes of conflict, to enter into regional agreements that don’t have us entering into long-term conflicts with no viable exit strategy. Here I also agree with Sanders, who says the ones we should not be short-changing are the vets who fought in previous wars.

  • benleet

    Stated above, $33,297 is average income for 90% of the lower-earning wage earners. That is about 144 million workers earning $33,297 per year, or $4.8 trillion. And $4.8 trillion is also about 38% of the national income using the data from the Congressional Joint Committee on Taxation, 2014, placing the income at $12.7 trillion. To simplify, 90% of the workers are earning, through wage income, 38% of the entire national income. That sounds bizarre. There are also benefits to be added to total compensation, but that doesn’t change the picture much. Also about 12% of the workforce are working voluntarily as part-time workers. Still, it doesn’t change the picture for me. Compensation is too low, much too low. The median wage earner earned $28,851 in 2014, from SSA source: https://www.ssa.gov/cgi-bin/netcomp.cgi?year=2014 — I calculated that the average income for the lower-earning 50% of workers was less than $13,000 a year. And if you look at the CBO report about income distribution for 2011, the average post-transfer and pre-tax income for all households is $93,900, and adjusted to today’s dollar that’s about $99,000 per year. One comment said that this should be front page news. I agree.

  • MD Karim

    Economics Needs Democratic Economic Theories and Global
    States Need more Democratic Economic Institution for Democratic Economy
    *********************************************************

    A larger state primarily runs on structures and institutions. Policy changes bring decimal value, while structural and institutional changes bring digital value. Democracy is now a universal value. Without economic institutions corresponding to democratic political, social and cultural, democratic state is defective. Economics theories and institutions also must be devised on universal democratic value based on equitable and freedom rights.

    Capital is not only a factor of production, but also a prime factor for income distribution as well as for the nature of economic system and political economy. So, Capital Distribution is more crucial than Income Distribution in Economics.

    Fundamental Limitation of Economies is that it has many theories of income distribution, but has no theory on capital distribution. Therefore, existing Economics with only income distribution theories are less capable to explain and solve the emerging democratic economic system and globalization i.e. democratic international economic integration.

    Still today, the inheritance statues of various religions are used in transferring and distribution property/capital over generations. Those statutes had/have generated monopolistic/oligopolistic, quasi-democratic and democratic economic systems and political economics accordingly.

    Undemocratic (monopolistic) inheritance institutions of Roman-Catholic successively generated Slavism, Feudalism and Capitalism in European societies/states with development of technology. Quasi-democratic inheritance institutions of Hindu-Buddha had generated quasi-democratic economic systems

    Democratic Inheritance institutions of Christian-Muslim generate democratic economic systems accordingly. Both statues generate democratic property/capital ownership, competitive market and equitable income distribution. Those statues neither generate economic classes nor social classes and crisis.

    Religious inheritance statues of property are deductive, dogmatic and unchangeable. While scientific inheritance laws of property/capital are inductive, imperial, casual and changeable to necessity of emerging economic system and political economies. Democracy is also an inductive and changeable value and process on realities.

    French Economist Thomas Piketty have unveiled that capital grows faster over income. If a democratic capital distribution is ensured, both capital and income would grow consistently; and many crises of economies and economic system and political economy can be solved. Another
    fundamental institution for democratic economy is Democratic SAI institution of a larger state. It is not the situation to discuss that issue.

  • stop rambling

    Absent from this research is corresponding data that also shows (1) how unions were originally created to specifically exclude freed slaves from employment and the subsequent economic impact on Black income vs. White income (i.e., the wage/income gap); and (2) how Blacks, Latinos, and Women have routinely been prohibited from union membership, apprenticeship programs and from leadership positions. In summary, unions have primarily been great for White people, especially the upper hierarchy, because unions practice the same “glass ceiling” discriminatory practices (EEO-1, EEO-4, etc.) as non-union employers. I’m not impressed by this research.

    • Absent from YOUR comment are any data that show that unions were created to exclude freed slaves from jobs. And that’s because it’s not true. But I suspect you know that. Your defense of indentured labor is the most illogical thing I’ve read this week.

  • microsrfr

    It’s the Workers Stupid! (after “It’s the Economy Stupid!” from the 1992 Clinton campaign)

    Robert Goldschmidt 1 June 2016

    The underlying factor driving our current political process is the over four-decade decline in the ability of workers to purchase the fruits of their labor with their wages. Through both Republican and Democratic administrations and congresses, the tenants of the American Dream — own a home, put food on the table, comprehensive health care, send children to state college and a respectable retirement, which were a reasonable expectation in 1972 for a single-worker family, are now beyond reach, even for multiple-worker families.

    History of Wages as a Percentage of GDP

    https://fred.stlouisfed.org/graph/?g=5ap1

    Compared to 1972, today’s full-time workers’ paychecks are short an average of over $1,000/month. The tightening economic situation for families is reaching the point where, having lost hope with the establishment, they are grasping for real change. This is reflected in the large crowds attracted to Donald Trump, the Populist, and Bernie Sanders, the Democratic Socialist.

    Viable economies are a balance of Capitalism and Socialism — capitalist trucks drive over socialist roads and the idea that the government is most effective at producing capital goods is as far fetched as private business being most effective at providing public services like schooling. Today, even the capitalistic elements of production have been compromised by the rise of monopolies which destroy competition and squelch innovation through inordinate market power. A detailed analysis and set of solutions to restore the balance between Capitalism and Socialism that existed in 1972 can be found at:

    “Rewriting the Rules of the American Economy: An Agenda for Growth and Shared Prosperity”, Joseph E. Stiglitz

    In a 1972 economy, Stiglitz’s remedies would “Make America Great Again” by restoring balance between Capitalism and Socialism. However, in order to control corporate market power in today’s economy, we now need to draw an even clearer line of demarcation between what is provided by government and by private industry:

    Government ownership and operation of all distribution systems that utilize easements, including sewer, water, power, communications, airports, roads, railroads and Hyperloops. Break-up of all international, domestic and regional monopolies.

    Free public education through the 16th grade

    Reduced military contractor influence through mandatory public service for everyone upon reaching the age of 18 with a random military draft from those in pubic service. Restricted use of federal contractors for services.

    Even if these changes were implemented, however, there would still remain severe long-term deterioration in employment and wages as a result of the structural changes resulting from automation, outsourcing and the internet. Left unchecked, these would drive the labor cost component of production down to a morally and economically unsustainable level. We need to take these remaining steps to perfect our Union:

    An excess profits tax on corporate income which exceeds a viable profit to payroll ratio.

    A global minimum wage with tariffs for those imports that are not compliant.