What does it mean when the top 1% receive a fifth of all income?
Two respected sources put the top 1%'s share of US income at 19.5% and 14.6% for the same year, and both can be right.
▶ Start the storyWhen someone says the top 1 percent receive a fifth of all income, they are quoting an : the percentage of a nation's income received by a specified richest or poorest slice of the population. Economists use shares like these for the top 10 percent, the top 1 percent, even the top 0.01 percent, to see how income is concentrated among top earners. Unlike the , which blends everyone into one number, a top share points straight at the top.
There are other ways to compare slices. The divides the richest 10 percent's share of income by the poorest 40 percent's share. The Chilean economist Gabriel Palma noticed that middle-class incomes almost always make up about half of national income, while how the other half is split between top and bottom varies a lot from one country to another. The 20:20 ratio compares the top fifth with the bottom fifth: in one comparison it was about 4 times in Japan and Sweden, 7 in the UK and 8 in the US.
The top 1 percent's share in the United States tells a story over time. Using tax records, a method Saez and Piketty pioneered in 1998, researchers found that the US top 1 percent's share bottomed at 10.9 percent in 1975, 1976 and 1980, then reached 14.4 percent by 1989, 17.5 percent by 1999 and 19.6 percent by 2007. The share held by the top 1 percent was as large in 2005 as in 1928.
US top 1% share of pre-tax income
% of income
| Top 1% pre-tax share | |
|---|---|
| 1975 | 10.9 % of income |
| 1989 | 14.4 % of income |
| 1999 | 17.5 % of income |
| 2007 | 19.6 % of income |
But be careful: the number depends on definitions. For 2011, Saez put the top 1 percent's share at about 19.5 percent, while the , using different data, reported 14.6 percent. Both are careful measurements. They count income differently, which is why a good reader always asks, share of what?
Top 1% share of US income in 2011, two estimates
% of income
| Top 1% share | |
|---|---|
| Saez (IRS data) | 19.5 % of income |
| CBO (IRS + Census) | 14.6 % of income |
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Recap
A top share means a slice of a pie, so always ask what counts as the pie, who is in the slice and whose data it is.
💡 A trick to remember it · Slice, pie, counter: who is in the slice, what is in the pie, and who is doing the counting.
Surprising fact · Two respected sources gave 19.5% and 14.6% as the top 1% share for 2011, because they count income differently.
Sources (2)
No source, no claim. Every fact in this lesson (14 claims) cites at least one of these.