Is income inequality real?
If it's real, is it any different now than historically?
An economist at the University of California has probably produced the most complete data on those questions.
Based on tax records from 1907 to 2008, Emmanuel Saez unearthed a U-shaped pattern in the share of incomes going to people in the top 10 percent of incomes.
From 1907 to 1940, the top 10 percent earned about 45% of the total. During the war years, their share dropped to about 33%, and it stayed there until the 1970s when it rose back to the mid-40s (e.g., 48% in 2008, the highest share since 1928).
What's most interesting is that when Saez took these figures apart, he discovered that most of the fluctuation in the top ten percent's share of incomes occurred within the very top one percent's share. (The top one percent's share went from the low 20s in the 1920s to less than 10 percent in the 1960s and back to the low 20s in 2008.)
By the way, the top one percent of incomes started at $368,000 a year in 2008.
The stark differences become even clearer in Saez's anlysis of recent household incomes. Between 1993 and 2008, average real incomes for the lowest 99 percent grew less than one percent a year (i.e., an average of 0.75%). In contrast, during the same period, incomes for the top one percent grew 3.9 percent per year.
Thanks to the benefits of compounding, over that 15-year period, that's a 12 percent increase for the 99 percent and a 79 percent increase for the top one percent.
In other words, in that 15-year period, the top one percent captured more than half of all income growth.
But, as they say on TV, wait there's more!
Saez went even deeper into that period and broke out the periods of expansion and recession. All incomes declined during the recession periods of 2000-2002 and 2007-2008, even the top one percent's. And all incomes grew during the expansionary periods of 1993-2000 and 2002-2007, even the 99 percent's.
But what's interesting is to contrast the four periods.
During the 2000-2002 recession, people in the one percent highest income category bore 57 percent of the decline. During the 2007-2008 recession, they bore less than half (47%) of the decline.
Saez's findings on what happened during the expansions deserve to be quoted because they shed so much light on the current controversy:
"While the bottom 99 percent of incomes grew at a solid pace of 2.7 percent per year from 1993–2000, these incomes grew only 1.3 percent per year from 2002–2007. As a result, in the economic expansion of 2002-2007, the top 1 percent captured two thirds of income growth.
"Those results may help explain why the dramatic growth in top incomes during the Clinton administration did not generate much public outcry while there has been an extraordinary level of attention to top incomes in the press and in the public debate since 2005. Moreover, top income tax rates went up in 1993 during the Clinton administration (and hence a larger share of the gains made by top incomes was redistributed) while top income tax rates went down in 2001 during the Bush administration."
So yes, it's real. And it's different.