Among the most interesting of the long-term economic indicators I track is the Census Bureau's annual data on the mean (average) household income received by each fifth (quintile) and top 5 percent. See my latest update here. A conspicuous pattern in the series is the widening of the spread in income growth that started during the first half of the 1980s.
I received an email a few days ago from George Bussey, MD, a healthcare Executive and Chief Medical Officer in Hawaii. George points out:
“If you pull out the top 5% from the top quintile, the 80-94 percentile group looks just like the other quintiles in terms of real income growth, i.e., none to minimal. From other analyses I've seen, that disproportionate growth is accentuated the thinner you slice the top end, i.e., the top 1% have much better growth than the 95-98, and the top 0.1% take the lion's share of growth from the top 1%.
“So seems that unless you are in VERY rarified atmosphere, we are all treading water together, to the benefit of a very few.”
George's email inspired a couple of charts based on the latest CB data on real household incomes to illustrate his point. The first breaks apart the top quintile (the blue line) into two constituents George mentions: the top 5 percent and everyone else in the quintile (i.e., the top 20% minus the top 5%). The historical values adjusted to 2013 dollar value.
The next chart shows the relative growth of the quintile and diverging growth of two constituents. I've added the NBER designated recessions during this 46-year time frame to illustrate the correlation between the incomes and the business cycle for the high-income crowd.
In the second chart we see the rather dramatic parting of ways in the early 1990s for the two subcomponents of the top quintile. Incomes had peaked for both in 1989, well in advance of the nasty eight-month recession that began in July 1990. The top five percent rebounded after that recession and soared during the Roaring Nineties. The two 20th century recessions have clearly impacted the top quintile, but especially the top five percent, which hit its growth peak in 2006 and was down 6.2% from that peak as of the 2013 annual data.
