3-The second trend contributing to the Great Divergence concerns not the middle class but the rich. It went unnoticed for a long time because of limitations to the quintile data shown in the previous slide. That data is based on household income surveys conducted monthly by the Census Bureau, which …
3-The second trend contributing to the Great Divergence concerns not the middle class but the rich. It went unnoticed for a long time because of limitations to the quintile data shown in the previous slide. That data is based on household income surveys conducted monthly by the Census Bureau, which aren’t particularly useful for making fine distinctions at the top of the income scale. Seeking more precise information about the rich, economists Thomas Piketty of the Ecole d’Economie de Paris and Emmanuel Saez of Berkeley turned to income data from the Internal Revenue Service.
What Piketty and Saez found was that much of the Great Divergence was driven by a stunning rise in income for the top 1 percent (who today earn about $368,000 or more). This group’s share of national income more than doubled, from 8 percent in 1973 (the end of the Great Compression) to 18 percent in 2008. Meanwhile, the bottom 99 percent’s share of income, which stood at 92 percent in 1973, dwindled to 82 percent in 2008.
The top 1 percent’s share of income accelerated at a particularly fast rate starting in the mid-1990s, even as the education-based income gap leveled off. During the Great Divergence, Part 2, having a college or graduate degree was no protection against falling behind relative to the top 1 percent.