| Executives, managers, supervisors (non-finance) | 42.5% |
| Financial professions, including management | 18.0% |
| Lawyers | 7.3% |
| Medical | 5.9% |
| Not working or deceased | 3.8% |
| Real estate | 3.7% |
| Entrepreneur not elsewhere classified | 3.0% |
| Arts, media, sports | 3.0% |
| Business operations (nonfinance) | 2.9% |
| Computer, math, engineering, technical (nonfinance) | 2.9% |
| Other known occupation | 2.7% |
| Skilled sales (except finance or real estate) | 2.3% |
| Professors and scientists | 0.9% |
| Farmers & ranchers | 0.6% |
These industry grouping come from the SOC (Standard Occupational Classification) coding used by Federal statistical agencies to classify workers into occupational categories for the purpose of collecting, calculating, or disseminating data.
This paper uses the following definition of income: Income = Adjusted Gross Income - social security income - unemployment income - state tax refunds.
The only comment I will make is that this shows that almost 42.5% of the 1%'ers are the owners and managers of non-financial businesses. These people are not Wall Street. These are people who work and own, manage or supervise the businesses that are the heart of the U.S. economy.
I will offer the opinion that since the collapse of the real estate bubble there has been a decrease in the percent of 1%ERs in financial professions and real estate.
The paper also seeks to answer the question: Why has the gap in income increased so much since 1979? There is no easy answer.
The authors suggest several hypotheses to explain the significant increase in income disparity:
- advancing globalization. Some high income people can sell their skills and the skills of their companies to a larger set of customers.
- technology has made the salaries of highly-skilled workers much more valuable than the salaries of low-skilled workers.
- there are more "superstars" creating larger income gaps between those at the top and those not at the top. This is more obvious for people in entertainment and sports.
- executive compensation has changed giving, for example, stock options to executives.
- social norms had changed reducing outrage regarding high salaries.
- the Tax Reform Act of 1986 lowered the top rate for individual income taxes minimizing the incentive to form C-corporations and migrating some income onto personal tax returns from S-corporations.
They also mention income elasticity. This means at least two things: lower tax rates provide incentive to earn more because you get to keep more. This is also true at the opposite end of the income picture. Folks who benefit from food stamps, unemployment and Medicaid may have diminished reasons for increasing their income because they will lose some benefits. The issue of income elasticity is so intertwined with social issues that it becomes nearly impossible to discuss it in only economic terms.
RPM - SF Van Ness
CA DRE # 01143973 | NMLS # 302379
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