The Economist took a
look at the top one percent and "the changing complexion of America’s rich." It highlighted Mitt Romney as a reflection of this change, because "the wealthiest 1% of Americans not only get more of the pie," but also because "they are increasingly creatures of finance." There have been wealthy presidential candidates before, but Romney represents "the first candidate from the world of high-octane finance."
The Economist writes of the shift to finance, "According to an analysis of tax returns by Jon Bakija of Williams College and two others, 16% of the top 1% were in medical professions and 8% were lawyers: shares that have changed little between 1979 and 2005, the latest year the authors examined (see chart). The most striking shift has been the growth of financial occupations, from just under 8% of the wealthy in 1979 to 13.9% in 2005. Their representation within the top 0.1% is even more pronounced: 18%, up from 11% in 1979." A
graphic from the
New York Times also focuses on the occupational distribution of the top one percent.
Also indicative of the shift to finance, it appears that the wealthiest of the wealthy are now employed in financial occupations, a change from years past. "[Steve] Kaplan [of the University of Chicago] and Joshua Rauh of Northwestern University note that investment bankers, corporate lawyers, hedge-fund and private-equity managers have displaced corporate executives at the top of the income ladder. In 2009 the richest 25 hedge-fund investors earned more than $25 billion, roughly six times as much as all the chief executives of companies in the S&P 500 stock index combined."
What does a household in the top one percent make? "The average household income of the 1% was $1.2m in 2008, according to federal tax data." But
The Economist notes, "The ultra-rich skew that average upwards: admission to the 1% began at $380,000 in 2008." Of course, income is not the only measurement of wealth: "Measured by net worth, rather than income, the top 1% started at $6.9m in 2009, according to the Federal Reserve, down 23% from 2007."
The Economist cites Mr. Kaplan, who argues that the move to finance largely accounts for the growth in the wealth gap. "Updating a series developed by Thomas Piketty and Emmanuel Saez, Mr Kaplan notes that the share of income going to the 1% reached an 80-year high of 23.5% in 2007, only to sink to 17.6% in 2009 as the financial markets deflated (see chart). The trend is even more pronounced for the top 0.1%, whose share of total income rose to 12.3% in 2007 but sank to a still disproportionate 8.1% in 2009."
Research indicates that inequality in the U.S., as measured by the share of total income that goes to the top one percent of earners, has grown faster than in other countries.
The Economist surmises that among other factors, this development could be resulting from "the relatively large role of the financial sector in English-speaking countries...[as] even more of the top 1% work in finance in Britain than in America."
Chances are that if you are born wealthy, you are likely to retain your wealth as an adult: "Membership in America’s 1% is relatively stable; three-quarters of the households in the percentile one year will still be there the next. Although the proportion shrinks over time, one study found that the vast majority of the top 1% were still in the richest 10% a decade later." The reason for this is fairly straight-forward: "rich parents tend to produce rich kids." Their children go to college and graduate institutions at a disproportionately high rate; "According to Gallup, 72% of the 1% have a college degree, and half have a postgraduate degree; those are two to three times the proportion of the other 99%." Numbers also indicate, "The 1% are more likely to be married and to have children."
And if you're born wealthy, it's likely that you'll marry someone from a similar economic background. "The rich also increasingly marry people like themselves. Mr Bakija and his co-authors found that between 1979 and 2005, the share of spouses of the 1% who had blue-collar or 'miscellaneous' service-sector backgrounds declined slightly, from 7.9% to 6.4%. The share of spouses who worked in finance, property and law rose from 3.5% to 8.8%."
Individuals in the top one percent are likely to be politically active, and although their political preferences are somewhat "eclectic," they tend to lean toward the Republican party. "Politically, Gallup polls find that the 1% are more likely than the 99% to identify themselves as Republicans (33% to 28%) and less likely to be Democrats (26% to 33%)." They rate the budget deficit as their central concern, and unemployment as their second; the other 99 percent of Americans prioritize these concerns in the reverse order.
The Economist writes that individuals in the top one percent "are far more politically engaged than the average 99-percenters," citing a study which showed that "68% make campaign contributions, nearly half had contacted a member of Congress and a fifth had solicited contributions on behalf of a candidate."
How would individuals in the top one percent describe themselves? Often, it is difficult to locate an answer: "Most of the 1% prefer not to talk about their good fortune."
The ranks of the unemployed are still large, and they include many people who have faced long-term unemployment: "there are still 14 million people searching for work, a little less than half of them for six months or longer," the Times writes. And with the housing market "still teetering" and the public sector hurting, there is plenty to worry about in the report. Local government cut 35,000 jobs in September, 24,400 of which were in public education. The president of the American Federation of Teachers, Randi Weingarten, told the Times that 277,000 education jobs had been cut since 2008--and that she expects another 280,000 to go in the next year.
