"Super-Rich" Aren't the Same from Year to Year
For the 2011 season in Major League Baseball, the average salary for the top 25 highest-paid baseball players is $19,751,000, with Alex Rodriguez of the New York Yankees leading MLB at a salary of $32 million, according to the USA Today Salaries Database. In comparison, during the 1988 season the average salary for the top 25 highest-paid players was $1.955 million, or $3.657 million in today's dollars. The highest paid player that year was New York Mets catcher Gary Carter, who made $2.36 million that year, or $4.41 million in 2011 dollars.
With those data in mind, consider this commentary from Kevin Williamson at NRO:
"Are the rich really getting richer? That’s a pretty standard line from the Left, a lament usually cited in the course of calling for higher tax rates. Robert Reich is particularly fond of this mode of attack: A recent post of his was headlined, “For 70 years, the wealthy have grown wealthier.” Professor Reich probably doesn’t write his own headlines, but it’s a common enough sentiment for him, and his prose is rich with phrases such as “the super-rich got even wealthier this year.”
MP: The flaw in Robert Reich's analysis is that he is assuming that "the wealthy" in one year are the same exact group as "the wealthy" in a subsequent year. In the baseball example above, it would be like assuming the same 25 highest-paid players in 1988 were the same 25 highest-paid players in 2011, with an income five times greater and a greater concentration of income among the "super-rich." But we know that's not true, the highest-paid players in 2011 are a completely different group than the top-25 in 1988, just like the top 1% of Americans by income or wealth in one year are a completely different group than the 1% in a different year.
Here's more from Kevin:
"When somebody says that the top 1 percent saw its income go up by X in the last decade, they are not really talking about what happened to actual households in the top 1 percent. Rather, they are talking about how much money one has to make to qualify for the top 1 percent. All that really means is that the 3 million highest-paid Americans in 2010 made more money than did the 3 million highest-paid Americans in 2000, the 100,000 highest-paid Americans this year made more money than did the 100,000 highest-paid Americans made in 2000, that the 50,000 highest-paid Americans made more money this year than did the 50,000 highest-paid Americans made in 2000, that the 1,000 highest-paid Americans this year made more money than did the 1,000 highest-paid Americans made in 2000, etc., which is not shocking. But, as the Treasury data show: They are not the same people.
When Robert Reich writes that “super-rich got even wealthier this year,” he is making a statement that is not true in most cases — 75 percent of the Clinton-era super rich were not members of the Obama-era super rich. In fact, Treasury found:
Or, as the authors of the study put it: “While the share of income of the top 1 percent is higher than in prior years, it is not a fixed group of households receiving this larger share of income.”
- Income mobility of individuals was considerable in the U.S. economy during the 1996 through 2005 period with roughly half of taxpayers who began in the bottom quintile moving up to a higher income group within ten years.
- About 55 percent of taxpayers moved to a different income quintile within ten years.
- Among those with the very highest incomes in 1996 — the top 1/100 of one percent — only 25 percent remained in the group in 2005. Moreover, the median real income of these taxpayers declined over the study period.
- The degree of mobility among income groups is unchanged from the prior decade (1987 through 1996).
- Economic growth resulted in rising incomes for most taxpayers over the study period: Median real incomes of all taxpayers increased by 24 percent after adjusting for inflation; real incomes of two-thirds of all taxpayers increased over this period; and median incomes of those initially in the lower income groups increased more than the median incomes of those initially in the high income groups.
Bottom Line: For Robert Reich to say that "the super-rich got even wealthier this year" implies that the "super-rich" this year is the same fixed group of "super-rich" as last year that are now even wealthier, when that is not an accurate description of reality. It would be like saying "the super-rich baseball players in 2011 got even wealthier than in 1988," without acknowledging that the "super-rich" in 2011 are a completely different group of players than in 1988.
HT: Pete Friedlander