Berkeley's Emmanuel Saez and Mike Veall at McMaster University have a paper (AER version; NBER version) on how the top end of the income distribution in Canada has evolved over time. (Saez has of course been involved with many other projects using US data.) Happily for me, they've posted what is now my favourite excel file so that I can get a better feel for a fascinating piece of work.
I was aware that the share of income at the top end of the distribution had risen in recent years, but what I hadn't realised was just how concentrated those gains were. In fact, they're so strongly concentrated that the income distribution is self-similar: it looks the same regardless of how closely you zoom in. It's not quite as fascinating as all those cool Mandelbrot sets (example here) that popped up when chaos theory was fashionable, but it's still worth looking at.
The share of income earned by those in the top decile has been increasing in the past 15-20 years. Here's what you get if you divide that top 10% into the top 5% and the next-highest 5%:
The share of income in the 0.90-0.95 interval has hardly moved at all; all the increase is due to the increase in the top 5%. Let's zoom in on the top 5%:
Again, the income share of the 0.95-0.99 interval is pretty stable; the increase since 1985 is almost entirely generated by the top 1%. Let's look closer:
Again, much of the increase in the top 1% share is due to gains in the top 0.1%. Although it is the case that some of the gains since 1985 are due to an increase in the share earned by those in the 0.99-0.999 interval, their share is not far from the historical average.
It's only when we look at the top 0.1% does the pattern break down:
This time, we do see an increase in the income shares of both the top 0.01% and the 0.999-0.9999 interval.
What's even more interesting is the way that the very rich are generating all that income: by working for other people. In 1946, capital holdings accounted for 53% of the income of those in the top 0.01%, and 27% was wage income; the other 20% was entreneurial income from self-employment. In 2000, the very rich generated only 25% of their income from capital, and 74% was in the form of wage income; entrepreneurs who work for themselves have almost completely disappeared from the ranks of the very rich.
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