Great Recession Produced Same Income Inequality as the Great Depression

It is hard to wrap your mind around this statistic just released by a study done by researchers at UC Berkeley, the Paris School of Economics, and Oxford University: In 2012 the top 10 percent of earners in the US took home nearly half of the total income earned in the country. The top 1 percent alone claimed almost 20 percent of the total household income last year. NPR reported the story, noting that this was the widest income gap since 1928, on the eve of the Great Depression.

The richest Americans were hit hard by the financial crisis. Their incomes fell more than 36 percent in the Great Recession of 2007 to 2009 as stock prices plummeted. Incomes for the bottom 99 percent fell just 11.6 percent, according to the analysis.

But since the recession officially ended in June 2009, the top 1 percent have enjoyed the benefits of rising corporate profits and stock prices: 95 percent of the income gains reported since 2009 have gone to the top 1 percent.

Table 1 of the report shows that the last time that the bottom 99 percent of households had a reasonably high rate of income growth was during the Clinton presidency, but even then the top 1 percent was far outstripping the rest. It is an old adage that it takes money to make money, but these numbers seem extraordinarily out of line, and Figure 1 in the report shows that inequality was at its lowest level between 1942 and 1982 when the top 10 percent were never bringing home more than a third of all the income. Since the early 1980s, however, there has been a steady rise in inequality, roughly in line with the drop in taxes paid by the richest segment of American society (I know, correlation isn't necessarily causation, but it sure seems like a compelling story).