The Top 1 Percent of Wage Earners Falters in 2013—Was it a Temporary Event?
The release of new Social Security Administration wage data gives us a chance to update our analysis of wage trends for the top 1.0 percent of wage earners and wage groups in the bottom 99.0 percent. There’s some surprising news this year, as top 1.0 percent wages fell, while the remainder of the workforce saw real wage improvements. In the analysis below we review these recent trends, as well as trends during the Great Recession and over the longer-term.
Wage growth from 2012 to 2013
New data for 2013 (Table 1) provide some surprising news: real average annual wages nudged down slightly, falling 0.2 percent since 2012, because wages of the top 1.0 percent of wage earners declined, although those of the bottom 99.0 percent grew. The biggest wage decline was among the top 0.1 percent of earners, whose wages fell 9.0 percent, while the next 0.9 percent saw their wages fall just 1.4 percent. In contrast, the wages of the bottom 90 percent (averaging $32,333 in 2013) rose a modest 0.4 percent (real hourly wages did grow modestly in 2013). Higher wage workers, those earning between the 90th and 99th percentiles of wages (averaging $136,820 in 2013) fared the best, with real wages rising by 2.5 percent. Thus, wage inequality between high and middle/low wage workers grew even though those at the very top—the 1 percenters—actually lost ground. David Cay Johnston wrote on this yesterday. Our analysis goes beyond his reporting by placing earners in percentile wage groups (bottom 90 percent, top 1 percent, etc.) and providing analyses of changes over the Great Recession’s downturn and recovery and the longer-term changes back to 1979.
Cumulative percent change in real annual wages, by wage group, 1979–2013
| Year | Bottom 90% | 90th–95th | 95th–99th | Top 1% |
|---|---|---|---|---|
| 1979 | 0.0% | 0.0% | 0.0% | 0.0% |
| 1980 | -2.2% | -1.3% | -0.2% | 3.4% |
| 1981 | -2.6% | -1.1% | -0.1% | 3.1% |
| 1982 | -3.9% | -0.9% | 2.2% | 9.5% |
| 1983 | -3.7% | 0.7% | 3.6% | 13.6% |
| 1984 | -1.8% | 2.5% | 6.0% | 20.7% |
| 1985 | -1.0% | 4.0% | 8.1% | 23.0% |
| 1986 | 1.1% | 6.4% | 12.5% | 32.6% |
| 1987 | 2.1% | 7.4% | 15.0% | 53.5% |
| 1988 | 2.2% | 8.2% | 18.4% | 68.7% |
| 1989 | 1.8% | 8.1% | 18.2% | 63.3% |
| 1990 | 1.1% | 7.1% | 16.5% | 64.8% |
| 1991 | 0.0% | 6.9% | 15.5% | 53.6% |
| 1992 | 1.5% | 9.0% | 19.2% | 74.3% |
| 1993 | 0.9% | 9.2% | 20.6% | 67.9% |
| 1994 | 2.0% | 11.2% | 21.0% | 63.4% |
| 1995 | 2.8% | 12.2% | 24.1% | 70.2% |
| 1996 | 4.1% | 13.6% | 27.0% | 79.0% |
| 1997 | 7.0% | 16.9% | 32.3% | 100.6% |
| 1998 | 11.0% | 21.3% | 38.2% | 113.1% |
| 1999 | 13.2% | 25.0% | 42.9% | 129.7% |
| 2000 | 15.3% | 26.8% | 48.0% | 144.8% |
| 2001 | 15.7% | 29.0% | 46.4% | 130.4% |
| 2002 | 15.6% | 29.0% | 43.2% | 109.3% |
| 2003 | 15.7% | 30.3% | 44.9% | 113.9% |
| 2004 | 15.6% | 30.8% | 47.1% | 127.2% |
| 2005 | 15.0% | 30.8% | 48.7% | 135.4% |
| 2006 | 15.7% | 32.5% | 52.1% | 143.4% |
| 2007 | 16.7% | 34.1% | 55.4% | 156.2% |
| 2008 | 16.0% | 34.2% | 53.8% | 137.5% |
| 2009 | 16.0% | 35.4% | 53.6% | 116.2% |
| 2010 | 15.2% | 35.7% | 55.7% | 130.9% |
| 2011 | 14.6% | 36.3% | 56.9% | 134.1% |
| 2012 | 14.7% | 36.3% | 58.3% | 148.4% |
| 2013 | 15.2% | 37.2% | 59.5% | 137.7% |
Source: EPI analysis of Kopczuk, Saez, and Song (2010, Table A3) and Social Security Administration wage statistics
What explains the dip in top 1 percent wages? Without access to the underlying data, this is a difficult task, but here are some thoughts. This stratum of wages is heavily influenced by executive pay trends and, therefore, by the ups and downs of the stock market, which executive pay has closely tracked for the last twenty years. Stock values, judged by the Dow Jones index and the S&P 500, grew strongly (roughly 15 percent) in 2013, but CEO compensation for the largest firms grew a modest 2.8 percent. That does not explain a fall in wages though. The fall may be due to some income shifting, as tax rates did rise in 2013 (a new, higher top bracket at 39.6 percent, and an additional 0.9 percent Medicare tax on high earners). Those able to probably shifted compensation they would have received in 2013 into 2012 (when top one percent wages grew 6.1 percent). The Wall Street Journal did report that there were “more bonuses paid by firms in December to avoid higher federal tax rates.” If so, then we can expect the 2013 dip in wages to be temporary, and for the wages of the top 1.0 percent to recover strongly in 2014.
Wages in the Great Recession and recovery
Even with these results for 2013, the recovery from the Great Recession (the years since 2009) remains highly unequal in terms of wage growth. The bottom 90 percent has seen a modest 0.7 percent loss of wages, while those in the top 1.0 percent gained 9.9 percent, and other high earners (between the 90th and 99th percentiles) gained 2.8 percent. Because the wages of the top 1.0 percent took the biggest fall in the 2007-09 downturn, however, the highest earners in 2013 had wages that were still 7.2 percent below their 2007 levels. The bottom 90 percent has not recovered yet either, with wages down 1.3 percent since 2007. The only group to make gains since 2007 was wage earners between the 90th and 99th percentiles, whose wages are up 2.5 percent since 2007.
Change in annual wages, by wage group, 1979–2013 (2013 dollars)
| Average annual wages | Long-term | Great Recession | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Wage group | 1979 | 2007 | 2009 | 2012 | 2013 | 1979–2007 | 1979–2013 | 2007–2009 | 2009–2013 | 2012–2013 | 2007–2013 |
| Bottom 90% | $28,073 | $32,750 | $32,561 | $32,202 | $32,333 | 16.7% | 15.2% | -0.6% | -0.7% | 0.4% | -1.3% |
| Top 90th to 99th | $91,821 | $133,436 | $133,130 | $135,876 | $136,820 | 45.3% | 49.0% | -0.2% | 2.8% | 0.7% | 2.5% |
| 90th–95th | $77,863 | $104,384 | $105,393 | $106,161 | $106,830 | 34.1% | 37.2% | 1.0% | 1.4% | 0.6% | 2.3% |
| 95th–99th | $109,269 | $169,753 | $167,802 | $173,018 | $174,308 | 55.4% | 59.5% | -1.1% | 3.9% | 0.7% | 2.7% |
| Upper 1% | $264,850 | $678,455 | $572,654 | $657,965 | $629,423 | 156.2% | 137.7% | -15.6% | 9.9% | -4.3% | -7.2% |
| 99.0%–99.9% | $228,748 | $450,794 | $412,397 | $450,552 | $444,046 | 97.1% | 94.1% | -8.5% | 7.7% | -1.4% | -1.5% |
| 99.9%–100% | $589,761 | $2,727,399 | $2,014,971 | $2,524,686 | $2,297,812 | 362.5% | 289.6% | -26.1% | 14.0% | -9.0% | -15.8% |
| Average | $36,182 | $48,268 | $47,013 | $47,790 | $47,708 | 33.4% | 31.9% | -2.6% | 1.5% | -0.2% | -1.2% |
Source: EPI analysis of Kopczuk, Saez and Song (2010) and Social Security Administration wage statistics
Unequal wage growth since 1979
The longer-term trends show tremendous disparity in wage growth. Wages of the top 1.0 percent rose 137.7 percent from 1979 to 2013, while those of the bottom 90 percent rose just 15.2 percent. Within that top 1.0 percent, the upper 0.1 percent has experienced even greater growth—289.6 percent since 1979 (after peaking at 362.5 percent in 2007). Higher wage earners below the top 1.0 percent but higher than the bottom 90 percent saw their wages grow between 37.2 percent (90th to 95th percentiles) and 59.5 percent (95th to 99th percentiles). Though average wages for the bottom 90 percent did grow modestly in 2013, they are still just a blip in the long-term trends of disparate wage growth when compared to the top 1.0 percent.
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