As income inequality skyrockets, a new report from the Economic Policy Institute finds that the economic downturn and gradual recovery has exacerbated the trend. The wages of the richest Americans are making a dramatic comeback, while the rest of the country has seen its income drop by 1.2 percent since 2007.
The wealthiest earners took a hit in the immediate aftermath of the financial crisis, with wages declining 15.6 percent from 2007 to 2009. But these individuals will quickly recover all their losses, while the bottom 90 percent of Americans continue to see their wages shrink:
As the stock market regained its value in the recovery, one would expect the top 1.0 percent to fare better than other workers—and they have, with annual wages growing 8.2 percent from 2009 to 2011 (the S&P grew 37.4 percent over this period). As the recovery continues and the stock market sustains its growth, the top 1.0 percent of wage earners are likely to quickly recoup all of the ground lost in the downturn.
In contrast, annual wages of the bottom 90 percent of earners eroded by 0.6 percent in the downturn—and by a further 1.2 percent in the 2009–2011 recovery. This is not surprising given the persistently high unemployment over this period. Meanwhile, high-wage earners from the 90th to the 99th percentile enjoyed wage growth in the recovery—and are the only wage earners to have higher wages in 2011 than in 2007.
Entrenched wealth-friendly policies have helped smooth the recovery even more for the super-rich. Even under President Obama, maligned by conservatives as “anti-business,” chief executives have seen their paychecks grow steadily. And as top earners’ total incomes — including wages, capital gains, and other assets — recovered, they also benefited from lower tax rates (only some of which was addressed by the recent deal to avert the so-called “fiscal cliff”).
As the EPI report notes, income inequality shot up in recent decades, paused during the economic downturn, and then began growing again in the recovery. The richest 20 percent currently make eight times more than the bottom 20 percent in nearly every state.