That Notorious One Percent

(Image from savecivilization.org)
Economist Thomas Sowell, Fellow of the Stanford Hoover Institute, has a great gift. He makes economics simple. He does it again, here to explain the notorious 1% wealthiest in the U.S.
A recent column by Anna Quindlen in Newsweek (or is that Newsweak?) laments that "the share of the nation's income going to the top 1 percent is at its highest level since 1928."
Who are those top one percent? For those who would like to join them, the question is: How can you do that?
Easy: you can join them by selling your house in San Francisco (if you have one.)
Virtually anyone who owns a home in San Francisco, no matter how modest that person's income may be, can join the top one percent instantly just by selling their house.
But that's only good for one year, you may say. What if they don't have another house to sell next year? Well, they won't be in the top one percent again next year, will they? But that's not unusual.
Americans in the top one percent, like Americans in most income brackets, are not there permanently, despite being talked about and written about as if they are an enduring "class" -- especially by those who have overdosed on the magic formula of "race, class and gender," which has replaced thought in many intellectual circles.
Recent data from the Internal Revenue Service show that more than half the people who were in the top one percent in 1996 were no longer there in 2005. Among the top one-hundredth of one percent, three-quarters of them were no longer there at the end of the decade.
This kind of movement between income groups happens all the time, to and from all income groups, here and here. In the U.S. there are no permanent income classes, but constant movement between income groups.
Among corporate CEOs, those who cash in stock options that they have accumulated over the years get a big spike in income the year that they cash them in. This lets critics quote inflated incomes of the top-paid CEOs for that year. Some of these incomes are almost as large as those of big-time entertainers -- who are never accused of "greed," by the way.
Sowell points out:
Most Americans in the top fifth, the bottom fifth, or any of the fifths in between, do not stay there for a whole decade, much less for life. And most certainly do not remain permanently in the top one percent or the top one-hundredth of one percent.
So why does it seem like the richest 1% is mostly the same group? It is the way statistics are gathered, he explains.
Most income statistics do not follow given individuals from year to year, the way Internal Revenue statistics do. But those other statistics can create the misleading illusion that they do by comparing income brackets from year to year, even though people are moving in and out of those brackets all the time.
That especially includes the top one percent, who have become the focus of so much angst and so much rhetoric.


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