Posted December 11, 2024 at 9:54 am by Elise Gould and Jori Kandra

Wage inequality fell in 2023 amid a strong labor market, bucking long-term trends: But top 1% wages have skyrocketed 182% since 1979 while bottom 90% wages have seen just 44% growth

Key findings:

  • Wage inequality fell in 2023 as inflation-adjusted earnings grew for the bottom 90% (+0.9%) while earnings declined for the top 5% (–2.0%), top 1% (–3.3%), and top 0.1% (–4.7%).
  • For the entire pandemic business cycle between 2019 and 2023, earnings growth for the bottom 90% was more than twice as fast as for the top 5%.
  • Over the long run, however, earnings growth has been vastly unequal. From 1979 to 2023:
    • Wages for the top 1% and top 0.1% skyrocketed by 181.7% and 353.9%, respectively.
    • Wages for the bottom 90% grew just 43.7%.
  • The top 1% earned 12.4% of all wages in 2023—up from 7.3% in 1979. The bottom 90% earned just 60.7% of all wages in 2023, far lower than their 69.8% share in 1979.

Wage inequality fell for the second year in a row in 2023 but still remains extremely high, according to our analysis of newly available wage data from the Social Security Administration (SSA).

Average real earnings mostly held steady in 2023 (–0.1%) as inflation receded, but there were significant differences across the earnings distribution. The bottom 90% experienced the only growth of any group in 2023 (+0.9%), while the top 5% and the top 1% experienced losses of 2.0% and 3.3%, respectively. Even the top 0.1% experienced real wage losses in 2023 (–4.7%). These losses are surprising given that pay at the very top tends to move with the stock market, which held steady in 2023.1 We found similarly puzzling findings among top CEOs.

Table 1 shows average annual earnings by wage group for each of the business cycle peaks since 1979, as well as for the last two years (in 2023 dollars).

Table 1

Average annual wages and percent change in annual wages over time, by wage group, 1979–2023

Average annual wages (2023 dollars) Long-term change Pandemic business cycle change
Year 1979 1989 2000 2007 2019 2022 2023 1979–2019 1979–2023 2022–2023 2019–2023
Bottom 90% $29,953 $30,927 $34,618 $36,570 $40,988 $42,658 $43,035 36.8% 43.7% 0.9% 5.0%
90th–99th percentile $98,269 $112,894 $145,717 $159,743 $184,234 $191,658 $190,422 87.5% 93.8% -0.6% 3.4%
90th–95th percentile $83,421 $91,359 $116,313 $126,626 $144,537 $149,187 $148,812 73.3% 78.4% -0.3% 3.0%
95th–99th percentile $116,828 $139,814 $182,471 $201,138 $233,855 $244,747 $242,434 100.2% 107.5% -0.9% 3.7%
Upper 5% $149,849 $205,771 $285,946 $311,523 $344,947 $359,970 $352,773 130.2% 135.4% -2.0% 2.3%
Upper 1% $281,932 $469,603 $699,846 $753,063 $789,317 $820,863 $794,129 180.0% 181.7% -3.3% 0.6%
99.0th⁠–⁠99.9th percentile $244,599 $360,503 $469,930 $513,688 $558,413 $585,123 $570,687 128.3% 133.3% -2.5% 2.2%
99.9th–100th percentile $617,934 $1,451,500 $2,769,087 $2,907,434 $2,867,452 $2,942,523 $2,805,105 364.0% 353.9% -4.7% -2.2%
Average $38,621  $42,691  $51,269  $54,820  $61,363  $63,850  $63,810  58.9% 65.2% -0.1% 4.0%

Source: EPI analysis of Kopczuk, Saez, and Song, “Uncovering the American Dream: Inequality and Mobility in Social Security Earnings Data Since 1937” (2007) and Social Security Administration wage statistics.

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Wage compression has been striking over the pandemic business cycle

This wage compression—faster growth at the bottom than the top—is similar to what we found in 2022 and in our analysis of hourly wage data.2 In fact, when we look over the entire pandemic business cycle from 2019 to 2023, we find substantial wage compression. Figure A shows that the bottom 90% experienced the largest gains of any group (+5.0%) while the top 0.1% experienced downright losses (–2.2%). This period was characterized by a deep—but short—recession followed by a tremendous labor market bounceback engineered by intentional policy decisions.

Figure A

Wage compression over the pandemic business cycle: Change in real annual earnings by earnings group, 2019–2023

Change in real annual earnings
Bottom 90% 5.0%
90th–95th percentile 3.0%
95th–99th percentile 3.7%
99.0th⁠–⁠99.9th percentile 2.2%
Top 0.1% -2.2%
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Source: EPI analysis of Social Security Administration wage statistics.

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Over the long run, however, earnings growth has been vastly unequal (see Figure B). Between 1979 and 2023, annual earnings for the top 1% and top 0.1% skyrocketed by 181.7% and 353.9%, respectively, while earnings for the bottom 90% grew just 43.7%. On an annualized basis, wages for the bottom 90% grew just 0.8% per year, compared with 2.4% and 3.5% annualized wage growth for the top 1% and top 0.1%, respectively.

It’s worth noting that these vastly unequal growth rates are on top of the already vast inequality that existed in 1979. Back then, the top 1% earned average wages ($281,932) more than nine times as much as the bottom 90% ($29,953). In 2023, the top 1% earned average wages ($794,129) more than 18 times as much as the bottom 90% ($43,035).

Figure B

Cumulative percent change in real annual wages, by wage group, 1979–2023

Year Bottom 90% 90th–95th percentile 95th–99th percentile Top 1%
1979 0.0% 0.0% 0.0% 0.0%
1980 -2.2% -1.5% -0.7% 3.9%
1981 -2.2% -1.3% 0.3% 4.1%
1982 -3.0% -0.1% 3.1% 11.2%
1983 -2.1% 2.4% 5.5% 15.7%
1984 0.4% 4.4% 8.6% 23.3%
1985 1.0% 5.4% 10.4% 25.8%
1986 3.0% 8.3% 14.4% 35.2%
1987 3.0% 8.0% 16.2% 55.2%
1988 2.6% 8.0% 18.2% 70.3%
1989 3.3% 9.5% 19.7% 66.6%
1990 2.6% 7.8% 18.0% 68.5%
1991 1.4% 16.6% 21.7% 50.3%
1992 2.4% 19.5% 24.3% 68.5%
1993 1.7% 19.5% 26.1% 63.5%
1994 3.5% 22.5% 29.4% 61.3%
1995 4.7% 24.4% 32.6% 72.9%
1996 5.2% 25.1% 34.6% 80.2%
1997 7.7% 28.0% 39.7% 96.3%
1998 12.1% 33.8% 46.9% 112.8%
1999 14.7% 37.1% 51.9% 130.8%
2000 15.6% 39.4% 56.2% 148.2%
2001 16.6% 40.6% 56.1% 127.4%
2002 17.2% 41.9% 55.3% 112.5%
2003 17.9% 43.3% 57.5% 114.7%
2004 19.0% 45.4% 60.3% 132.3%
2005 19.1% 46.4% 63.1% 142.4%
2006 20.9% 49.6% 68.2% 153.0%
2007 22.1% 51.8% 72.2% 167.1%
2008 21.6% 51.9% 70.6% 147.5%
2009 21.4% 52.9% 70.1% 124.7%
2010 21.3% 54.2% 73.4% 141.6%
2011 20.4% 54.6% 74.4% 144.7%
2012 21.0% 55.4% 76.7% 161.0%
2013 21.6% 56.3% 78.0% 149.5%
2014 23.7% 59.0% 82.1% 163.0%
2015 28.0% 64.3% 88.6% 170.9%
2016 29.2% 65.4% 89.8% 163.5%
2017 31.1% 67.1% 92.0% 174.7%
2018 33.6% 69.8% 95.3% 176.6%
2019 36.8% 73.3% 100.2% 180.0%
2020 37.1% 77.7% 106.8% 197.4%
2021 41.7% 80.4% 113.6% 237.2%
2022 42.4% 78.8% 109.5% 191.2%
2023 43.7% 78.4% 107.5% 181.7%
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The data below can be saved or copied directly into Excel.

Source: EPI analysis of Kopczuk, Saez, and Song, “Uncovering the American Dream: Inequality and Mobility in Social Security Earnings Data Since 1937” (2007) and Social Security Administration wage statistics.

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The highest earners have amassed a growing share of total wages since 1979

Table 2 displays the share of total earnings garnered by each wage group in business cycle peak years between 1979 and 2023, as well as changes over the long term and in the pandemic labor market.

Given their higher earnings growth in recent years, the bottom 90% had a slightly higher share of earnings in 2023 than in 2019.

But in the long run, the highest earners have captured a growing share of total wages even relative to already substantial inequality that existed in 1979. The bottom 90% of workers earned only 60.7% of all wages in 2023, far lower than their 69.8% share in 1979. Meanwhile, the top 1% earned 12.4% of all wages in 2023, up from 7.3% in 1979. In other words, a group of workers that is 90 times as big in size earned less than 5 times as much in 2023 as the much smaller group.

Table 2

Share of all wages and percentage-point change in share of total wages over time, by wage group, 1979–2023

 

Share of wages Long-term change Pandemic business cycle change
Year 1979 1989 2000 2007 2019 2022 2023 1979–2019 1979–2023 2022–2023 2019–2023
Bottom 90% 69.8% 65.2% 60.8% 60.0% 60.1% 60.1% 60.7% -9.7% -9.1% 0.6% 0.6%
90th–99th percentile 22.9% 23.8% 25.6% 26.2% 27.0% 27.0% 26.9% 4.1% 4.0% -0.1% -0.1%
90th–95th percentile 10.8% 10.7% 11.3% 11.5% 11.8% 11.7% 11.7% 1.0% 0.9% 0.0% -0.1%
95th–99th percentile 12.1% 13.1% 14.2% 14.7% 15.2% 15.3% 15.2% 3.1% 3.1% -0.1% 0.0%
Upper 5% 19.4% 24.1% 27.9% 28.4% 28.1% 28.2% 27.6% 8.7% 8.2% -0.6% -0.5%
Upper 1% 7.3% 11.0% 13.7% 13.7% 12.9% 12.9% 12.4% 5.6% 5.1% -0.5% -0.5%
99.0th⁠–⁠99.9th percentile 5.7% 7.6% 8.2% 8.4% 8.2% 8.2% 8.0% 2.5% 2.3% -0.2% -0.1%
99.9th–100th percentile 1.6% 3.4% 5.4% 5.3% 4.7% 4.6% 4.4% 3.1% 2.8% -0.2% -0.3%

Source: EPI analysis of Kopczuk, Saez, and Song, “Uncovering the American Dream: Inequality and Mobility in Social Security Earnings Data Since 1937” (2007) and Social Security Administration wage statistics.

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Wage growth for the bottom 90% has lagged far behind average growth for much of the last 40-plus years. The data here support evidence from other data sources that show wages for middle-wage workers grew mainly in two other periods since 1979: the late 1990s and the five years leading up to 2019. It’s not a coincidence that these were two periods when policymakers allowed the unemployment rate to reach 4% (or lower) without slowing the economy in the name of inflation control.

Policymakers should heed this lesson and pursue full employment along with a host of other policies to curb rising inequality. This should include strengthening and enforcing labor standards such as those related to the minimum wage, the overtime threshold, and wage theft; increasing worker bargaining power by making it easier for workers to form unions; and reining in executive compensation with higher taxes, regulation, and better corporate governance.

Notes

1. Stock options are included in the SSA wage data along with wages, salaries, commissions, bonuses, and severance pay.

2.  In order to match Census methodologies, EPI has moved to using Chained CPI-U for inflation-adjustment; therefore, earnings levels are not directly comparable to earlier reports.

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