Who are the 1%, and what do they do for a living?

Look, a crazy anti-capitalist anarchist carrying a bizarre sign incompatible with the basic tenents of liberals:

Or not.

A lot of emphasis is on the “99%” versus the “1%” in these protests. But who are the 1% and what do they do for a living? Are they all Wilt Chamberlains and Oprahs and other people taking part in the dynamism of the new economy? Nope. It’s same as it ever was — high-level management and the financial sector.

Suzy Khimm goes through the numbers here. I’m curious about occupations. I’ll hand the mic off to “Jobs and Income Growth of Top Earners and the Causes of Changing Income Inequality: Evidence from U.S. Tax Return Data” by Bakija, Cole, and Heim. This is the latest and greatest report on occupations and inequality. Here’s a chart of the occupations of the top 1%:

distribution_1_percent

Inequality has fractals. Let’s go into the top 0.1% — what do they look like?  Here’s the chart of the occupations of the top 0.1%, including capital gains:

It boils down to managers, executives, and people who work in finance. From the paper: “[o]ur findings suggest that the incomes of executives, managers, supervisors, and financial professionals can account for 60 percent of the increase in the share of national income going to the top percentile of the income distribution between 1979 and 2005.”

For fun, there are more than twice as many people listed as “Not working or deceased” than are in “arts, media, sports.” For every elite sports player who earned a place at the top of the income pyramid due to technology changes and superstar, tournament-style labor markets that broadcast him across the globe, there are two trust fund babies.

The top 1% of managers and executives often means C-level employees, especially CEOs. And their earnings versus the average worker have skyrocketed in the past 30 years, so this shouldn’t be surprising:

How has this evolved over time?  Can we get a cross-section of the top of that protest sign above?

Same candidates. There’s a reason the protests ended up on Wall Street: The top 1% and top 0.1% comprises all the senior bosses and the financial sector.

One of the best things about Occupy Wall Street is that there is no chatter about Obama or Perry or whatever is the electoral political issue of the day. There are a lot of people rethinking things, discussing, learning, and conceptualizing the kinds of world they want to create. Since so much about inequality is a function of the legal structure known as a “corporation,” I’d encourage you to check out Alex Gourevitch on how the corporate is structured in our laws.

The paper notes that stock market returns drive much of the manager’s income. This is related to a process of financialization, something JW Mason has done a fantastic job outlining here. The “dominant ethos among managers today is that a business exists only to enrich its shareholders, including, of course, senior managers themselves,” and this is done by paying out more in dividends that is earned in profits. Think of it as our-real-economy-as-ATM-machine, cashing out wealth during the good times and then leaving workers and the rest of the real economy to deal with the aftermath.

Both articles mention chapter 6 of Doug Henwood’s Wall Street; anyone interested in how things have changed and where they need to go would be wise to check it out. It’s even available for free pdf book download here.

There’s good reason to focus on the top 1% instead of the top 10 or 50%. There is evidence that financial pay at this elite level is correlated with deregulation and the other legal changes that brought on the crisis. High-ranking senior corporate executives’ pay has dwarfed workers’ salaries, but is only a reward for engaging in shady financial engineering practices. These problems require a legal solution and thus they require a democratic challenge and a rethinking of how we want to structure our economy. Here’s to the 99% and Occupy Wall Street helping get us there.

(Updated:  This post fixed the inclusion of an incorrect chart which referred to the top 0.1% instead of the top 1%.  Additional chart added for top 1%.)

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28 Responses to Who are the 1%, and what do they do for a living?

  1. Doesn’t Table 1 refer to the “top 0.1 percent?”

  2. In fact, it appears that the whole Bakija, Cole, and Heim paper is about the top 10% of the top 1%. Not to be pedantic about this, but even if our politics inspires great violence against numbers, we should at least protect our orders of magnitude a little longer.

  3. Gordon Nash says:

    One big problem. That table shows the top 0.1% not the top 1%. It’s right there at the top.

  4. Mike says:

    That was a screwup on my end. Fixed now – correct chart actually included for top 1%, text rearranged to distinguish it from chart for top 0.1%.

  5. To be pedantic, “tenets,” not “tenants.:

  6. Mike,
    In reply to your invisible comment, you’re totally right. It is a big, fascinating paper, and I was incorrect in my “whole paper” comment.

    Assortative mating! Spousal occupations! (I love how the tables collapse “spouse not working or deceased” into a common category)

  7. G says:

    Is there distribution data that include capital gain? Presumably the finance sector will be even more over-represented?

  8. “Legal…” Sorry, what was that word?

  9. Nathanael says:

    So. It appears that deregulation of banking caused an explosion in the number of superrich in the finance industry.

    We already know that corporate executives — the plurality of the superrich — are superrich because nobody oversees them. (Stockholders? That’s a laugh, just ask any corporate democracy advocate.) This, however, seems to be an older and longer-lasting phenomenon than the financialization.

    Only way to deal with it is to tax their money away. Few of them earned it, and the few who did earn it don’t care about money (it’s easy for them to make more, any day of the week). Most of them essentially stole it. But historically the only way to consistently discourage this has been with confiscatory tax rates on humungous incomes, because it keeps the thieves from bothering.

    Eisenhower had it right: top rate of 92%. Even with the capital gains deduction that came out to 46%.

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  12. Clonal Antibody says:

    A couple of comments that I made on this article at New Deal 2.0 – It would be good to have Mikes views on those. So I am reposting them here.
    came across an anonymous comment http://econintersect.com/b2evolution/blog3.php/2011/10/10/dear-occupy-wall-street-will-you-stand-with-me#c2412 at global economic Intersection. It is interesting to note that the threshold between the 1% and the 99% is at a family income of $300,000

    I am reproducing the quote below

    Quote:
    If you live in the US, and your annual household income is above $300,000 then you are among the 1% and may be a part of the problem.

    If you earn that amount, and think that your work has intrinsic value 6 times that of the work performed by the median family, you are part of the problem, and not part of the solution.

    If you think that “the market is perfect,” and the valuations it gives to things is what those things are really worth, you are part of the problem, and not part of the solution.

    If you think that you are hard working, but others are lazy, you are part of the problem, and not part of the solution.

    The second comment:
    Many people think that income is normally distributed, which of course it is not. But it may be interesting to consider a situation where it is.

    Let us take two scenarios to illustrate the inequalities. In a normal distribution the cumulative value of 99% is reached at 2.33 std dev. Also, in a normal distribution, the mean, median and mode are all the same value.

    With a median family income of $50,000, and the 99% threshold income of $300,000, and assuming a normal distribution, the std dev would be 250,000/2.33 or $107,000 — under such a scenario, 32% of the population will have a negative income — an obviously impossible situation.

    If we assume that the bottom 1% of families make an income of $10,000 or less, unlikely, but possible, since welfare payment are higher than that. Then sd is $40,000/2.33 or $17,200 — In this scenario, the top 1% income should be $90,000.

    Even if we assume that the bottom 1% have zero income, the top 1% would begin at $100,000

    This arithmetic I think gives a different perspective on income inequality. Of course wealth inequality is much much worse than income inequality.

    Income means survival, and wealth is a way to power.

  13. piffledragon says:

    Interesting post, but the final claim about firm dividend payouts is incorrect. In reality firms have almost doubled their holdings of cash relative to assets since 1980 and this has coincided with a large decrease in dividends. Firms that don’t pay dividends (such as Apple) area relatively new and interesting phenomenon.

    I recommend the paper “Why Do U.S. Firms Hold So Much More Cash than They Used To?” by Bates et al published in the journal of Finance October 2009.

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  15. T.R. Elliott says:

    I’m still curious about the following: The data I’ve seen so far tells me about occupational percentages (e.g. percent of top earners who are lawyers). It doesn’t tell me what percent of the income stream each occupation as a group is actually grabbing, and hence what the average income (or other statistics) of that occupation are. For kicks, from data on the internet, I computed that top 20 US CEOs in 2010 took home $600 million, while top 20 entertainers took home $1.9 billion. Though that’s the top 20, it makes me wonder. What’s are the numbers of the rest. Because the CEO income for 2010 drops rapidly, while entertainer salaries don’t. E.g. Britney Spears in 2010 made more than all but three CEOs in the US. How can someone compute that aspect of this issue?

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  20. Matty says:

    Is it just me or does the category Not working or deceased imply that dead people are filling in tax returns?

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  24. D says:

    I’m curious what people at this level studied in college. Not all business managers are MBAs (especially entrepreneurs) and even those that are likely studied other than business as an undergrad. I work in software but studied music (a very common major for programmers). I know lots of folks in my field who have liberal arts degrees in things like political science, history, economics etc.

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