The graph is a bit hard to read since it's labeled poorly. The X-axis is the year. The Y-axis is the percentage of income relative to 1979, after-tax. They do not mention if these numbers were adjusted for inflation, but the report linked to on the page says the numbers are adjusted for inflation:
Income is adjusted for inflation using the Bureau of Labor Statistics’ research series of the consumer price index for all urban consumers (CPI-U-RS). -http://cbo.gov/ftpdocs/124xx/doc12485/10-25-HouseholdIncome....
That report is much more detailed than the Economist's summary.
So, in 2007 the top 1% made ~375% of what they did in 1979 (~275% gain). In 2007 the bottom 20% made ~120% of what they did in 1979 (~20% gain).
Here's why the rich get richer: because the 99% produce too damn much.
Consumerism worked for a while to keep things even, but we've reached a plateau. People can only buy so much crap. But we're more productive now than ever [1].
So where does all that extra money go? The people at the top take it. CEOs don't give their employees raises, and pocket the rest. Bankers play games with your excess money you've dumped into the market and "lose" it. etc.
No-one's missed that extra money until now, because there's always been enough work to go around. Now there's not. Maybe people aren't buying because their "confidence" is shaken. Maybe the Chinese are "taking our jobs". Maybe people don't need more crap.
Guess what, it doesn't matter. Everyone's stuck on debating why there's not enough work to go around. But really, the solution's simple.
Everyone should do less work.
The only way to simultaneously (a) reduce the income gap, (b) lower unemployment, and (c) not return to wasteful excessive consumerism is to shorten the work week and raise the minimum wage.
Those at the top will be forced to pay more per hour worked due to decrease in supply. This will fix the income gap.
The unemployed will suddenly find work, now that more workers are required to perform the same amount of work.
And no-one needs to find any arcane means of "increasing consumer confidence".
I propose a mandatory maximum of 35-hour non-overtime weeks, coupled with a 20% (or greater) increase in minimum wage. Necessarily will likely be a short-term (5-year or less) exemption from these policies for small business owners (defined as those whose executives take home in salary + bonuses less than some threshold, say $200k).
There once came a day when humans were productive enough that a two-day weekend was warranted. As we continue our march down the road of automation, it is only natural that we give ourselves more time to enjoy the fruits of our labors, and not devote our time to serve those more fortunate than us.
Second, that the people at the top have made out like bandits over the past few decades, and that now everyone else must pick up the bill.
I have no idea what The Economist could possibly mean by "pick up the bill" in this context. They know as well as anyone that wealth isn't conserved. If my company makes twice as much money next year as this one, I've added to the world's wealth, not subtracted from it.
Spending years and tens of thousands of dollars studying things no one is interested in isn't normal, but in the American middle class it is.
the top 1% of earners pay 38% of all income tax while earning 27% of all income. The top 50% pay 97% of all income tax.
Broken windows fallacy, broken window fallacy and zero-sum thinking everywhere in this whole debate.
That graph doesn't really pack any punch. Leaving politics to one side, this graph http://www.lcurve.org/ and this article http://www.vanityfair.com/society/features/2011/05/top-one-p... have more interesting numbers that better highlight how stark the disparity in income (and wealth) distribution is in the US.
Graph looks a little suspect.
1. Choosing 1979. If you started from 1999 all the graphs would look nearly the same. So, does that mean in the last 12 years the 1% is no better off?
2. Notice that the 1%'s advantage drops down significantly in a recession. They seem to have ignored the last one though, and stopped right at the height of the bubble.
That's what I can read.
The number missing from all these articles is how much taxable income is generated from the activities of the top 1% (including business tax, employment tax, sales tax from purchases, etc).
Perhaps it is necessary for the 1% to have huge sums of money and income compared to the rest in a flourishing economy. For one, it means they can spearhead the direction of capital. If you look at the graphs, everyone is doing better. It also leaves out many products that you can get now for less money or with more features. Everyone uses the same iPhones, college students and the rich.
There is not an inherent problem in income inequality if everyone has an acceptable standard of living. The problem is when the poor go without health care, food, shelter, education, Internet, and heating. Unemployment can be a large part of this.
Five points for the OWS guys.
1. Transparency. We need to see where every dollar of the US federal gov't is spent. It needs to be on the internet, and it needs to be easily accessable. An exception can be made for classified spending in specific, but not so categorically (IE we spend X on classified stuff). Additionally, just like there is a Surgeon's General Warning on cigarette packages, there needs to be a link on every candidates webpage that lists their top 100 donors, and what industry they are in. This website URL needs to be easily visible and placed in every television and radio advert as well.
2. Investment banks cannot also be commercial (depository banks). Investment banks become partnerships where c-level owners are financially responsible for the actions of their banks. The banking system survived before things changed from this, and it will survive afterward.
3. There should be a small federal tax on the sale of any type of derivative, bond, stock, or other financial instrument every time it is sold. Say $.10 per share, every time. The financial markets are for raising capitol for companies, not for financial hackers to make money. HFT is a waste of time and energy, adds unnecessary volatility, and has yet to be shown to be anything more than tangentially related to the goals of a financial security market, established for the purpose of raising capitol.
4. The tax code needs to be simplified. There are a number of ways to do this, but the end goal should be to end loopholes that allow companies like exxon to pay no federal taxes. Or any company for that matter to realize losses in the US and gains in a foreign country.
5. Finally, there should be a 4 term limit on US Senators, and an 8 Term limit on US Representatives. Self-explanatory.