The roaring twenties, at least their income gap, crash into the present. According to the Wall Street Journal:
The richest Americans’ share of national income has hit a postwar record, surpassing the highs reached in the 1990s bull market, and underlining the divergence of economic fortunes blamed for fueling anxiety among American workers.
The wealthiest 1% of Americans earned 21.2% of all income in 2005, according to new data from the Internal Revenue Service. That is up sharply from 19% in 2004, and surpasses the previous high of 20.8% set in 2000, at the peak of the previous bull market in stocks.
The IRS data, based on a large sample of tax returns, are for “adjusted gross income,” which is income after some deductions, such as for alimony and contributions to individual retirement accounts. While dated, many scholars prefer it to timelier data from other agencies because it provides details of the very richest — for example, the top 0.1% and the top 1%, not just the top 10% — and includes capital gains, an important, though volatile, source of income for the affluent.
The IRS data go back only to 1986, but academic research suggests the rich last had this high a share of total income in the 1920s.
Scholars attribute rising inequality to several factors, including technological change that favors those with more skills, and globalization and advances in communications that enlarge the rewards available to “superstar” performers whether in business, sports or entertainment.
Well, I wondered, what about not-even-stars-really in, say, baseball? I checked out the lowest paid member of the 2007 New York Yankees (let’s keep it in-state) for whom I could find 2007 statistics, pitcher Jose Veras. His record for the season was 0-0, although he had two saves to his credit. His earned run average was a hefty (that’s not good) 5.79. His 2007 Salary: a paltry $382,475.
Let’s compare the barely tested Mr. Veras with, say, a humble country parson of my denomination in Upstate New York. Putting together salary and probable housing costs gives an equivalent salary of roughly $50,000. Now my humble colleague would not be altogether “unskilled,” considering the fact that his or her M.Div. took more than 90 academic credits to earn. And neither is Mr. Veras unskilled, with his two saves in the bigs. What our society is saying is that Jose Varas, with his 0-0 record, two saves, and 5.79 ERA, is worth more than seven of my humble parsons.
It always seemed to me that something was out of alignment with incomes in our society. Where do you work? Who gets $382,475 there? I’ll bet people at that income level would consider their own contributions to society to be greater than 0-0 with a 5.79 ERA.
There is plenty wrong with a big gap between the rich and the poor, and plenty right with a small gap. We know this intuitively. I always got the same answer to this test question whenever I asked it:
Say you’re an average Joe/Jane. Where would you rather live, Paraguay or Norway?