Share of income of top percentiles of U.S. households
November 28, 2008
Note: This post deals with the proportion of total US income taken up by the households controlling the most income. The percentiles of the income distribution are given in a different post: Household income distribution, 2007.
The chart below is based on data of Saez and Piketty (Table A3), who rely on IRS publications.
The year 2006, the latest year for which data is available, has seen concentration of income by the top percentiles which has not been observed since the late 1920’s. Following a three-decade long process of increasing concentration of income by top percentiles, in 2006, a tenth of the U.S. population controlled half the national income, a hundredth of the population controlled a quarter of the income, a thousandth of the population controlled an eighth of the income and one ten-thousandth of the population controlled one-sixteenth of the income. Thus, the top x percentile group controls about 2 times more income than the top x/10 percentile group.
It is important, however, to note that even at the years of least concentration – the late 1950’s to the late 1970’s – the top percentiles controlled very disproportionate shares of the national income. The top 10% controlled at least one third of the income throughout the 20’s century. During those “golden years” of income dispersal, the top x percentile group controlled about 3 times more income than the top x/10 percentile group. The change in the share between the “golden years” and today is therefore not very significant at the top 10% level, but, by the repeated multiplication by a factor of 3/2, it is much more significant at the top 0.01 percentile level (these households now control (1/2)4 = 1/16 of the income, as opposed to controlling a mere (1/3)4 = 1/81 of the national income in, say, 1960).
One interesting implication of the fact that half the national income goes to the top 10% of households: if the national income were re-distributed so that each household received an equal share of the national income, the income available to each household would then be equal to the income of the household which currently is at the 90% percentile of the income distribution. Thus each household in the U.S. would, in such a situation, be making over $100,000 annually.
Update (22-Oct-2009): Added data for top 400 households for the years 1992-2006, made available by the IRS. The top 400 households (out of about 150 million) represent the top 0.0002667% of households. This tiny fraction of the households controlled in 2006 over 1.3% of the entire national income. The pattern of income share of top income groups described above holds tolerably well for this group as well: (1/2) to the power of log10(400 / 150 million) = 2.1%.