[Marxism] 80% of Americans have experienced a falling share of US income

[Michael Perelman]

This is the way I discussed the subject in The Confiscation of American Prosperity

	Despite a historically slow rate of growth, between 1970 and 2003, the Gross 
Domestic Product adjusted for inflation almost tripled, from $3.7 trillion to $11.7 
trillion (President of the United States 2006, Table B 12, p. 296).  Because the 
population also increased by about 35 percent during that same period, per capita 
income grew more slowly than the Gross Domestic Product.  On average, per capita 
income still has more than doubled    but not for everybody.
	Hourly wage earners certainly did not benefit from the economic growth.  
According to government statistics, hourly wages corrected for inflation peaked in 
1972 at $8.99 measured in 1982 dollars.  By 2005, hourly wages had fallen to $8.17, 
although they rose modestly during that period using a different measure of inflation 
(President of the United States 2006, Table B 47, p. 338).
	In a pathbreaking series of studies, economists Thomas Piketty from the 
French research institute, CEPREMAP and Emmanuel Saez of the University of California 
at Berkeley produced a veritable treasure trove of data for researchers interested in 
the distribution of income.  Using data from the Internal Revenue Service, Piketty 
and Saez reported gross pretax income for taxpaying units measured in 2000 dollars.  
This income excludes all government transfers to taxpayers    such as Social 
Security, unemployment benefits, welfare payments, etc.    as well as employees' 
payroll taxes, and capital gains.  Their data is especially valuable because, unlike 
most data sets, it provides information about the highest incomes.
	These data show that for the bottom 99 percent of taxpaying units, the 
average income stood at $36,008 in 1970, then peaked in 1973    at the same time as 
hourly wages    at $38,206.  This figure bottomed out in 1993 at $33,087.  By 2004, 
average income for the bottom 99 percent recovered somewhat to $37,295, but was still 
below where it had been three decades earlier (Piketty and Saez 2006; see also 
Johnston 2003, pp. 38 39; and Krugman 2002).
	Of course, not everybody in the bottom 99 percent fell behind, but the losses 
among the vast majority were sufficient to counterbalance the gains of the most 
fortunate members of this group.  Also, as Piketty and Saez warn, the data require 
some refinement.  Part of the shrinkage in the income per capita for the bottom 99 
percent of the population results from a decline in the number of people within the 
average taxpaying unit.  Also, the exclusion of capital gains creates a further 
understatement of income, especially among the most affluent of the bottom 99 
percent.




-- 
Michael Perelman
Economics Department
California State University
Chico, CA 95929

Tel. 530-898-5321
E-Mail michael at ecst.csuchico.edu
michaelperelman.wordpress.com