Still, it's interesting to ask what forms those claims take. Especially since there is a widely-held belief that today, unlike in the bad old days, the incomes of even the super rich are, at least on paper, mainly compensation for their work -- that they're a return on "human capital" rather than the old-fashioned kind. Is there anything to that?
Here's what the IRS Statistics of Income says:
Share of total income by source, filers reporting $1 million or more
| Year | Wages and salaries | Interest, dividends, rent | Capital gains | Business income |
| 1995 | 31.0% | 17.2% | 28.4% | 23.1% |
| 2000 | 33.2% | 10.3% | 42.5% | 13.1% |
| 2005 | 26.9% | 15.7% | 38.1% | 22.3% |
| 2008 | 30.7% | 19.8% | 30.4% | 23.2% |
Share of total income by source, filers reporting $10 million or more
| Year | Wages and salaries | Interest, dividends, rent | Capital gains | Business income |
| 2000 | 25.0% | 8.6% | 58.2% | 7.4% |
| 2005 | 17.5% | 17.4% | 50.8% | 17.8% |
| 2008 | 18.8% | 22.1% | 45.4% | 18.7% |
Share of total income by source, all filers
| Year | Wages and salaries | Interest, dividends, rent | Capital gains | Business income |
| 1995 | 76.4% | 7.3% | 4.0% | 6.9% |
| 2000 | 70.0% | 6.5% | 9.7% | 6.6% |
| 2005 | 69.5% | 6.8% | 8.9% | 8.9% |
| 2008 | 72.0% | 8.1% | 5.6% | 7.5% |
Source: IRS Statistics of income, author's calculations
Notes: Income above $1 million not broken out before 2000. All nonwage income is net of losses. Business income includes business/professional income, S corporation and partnership income, and farm income.
So no, it's no more true than it ever was that the rich earn their money, in even the most limited formal sense.
EDIT: In retrospect, I guess it would have been better to do the tables by year, with the rows by income class. Oh well.
You'll be better off making a comparison of figures from 2000, 1950, 1930, and 1900.
ReplyDeleteThe social composition of the advanced world hasn't changed very much since the fall of the Berlin Wall.
In any case, the figures are deceptive. Does the manager of Sun or Microsoft or Apple make their income by capital gains? But yes of course. But does it mean that they are not really being compensated for their skills? Not unless if you count stock options and the like in terms of executive compensation non-human-capital-based income.
I am inclined to believe that some degree of inequality is unwarranted and there is maldistribution of wealth. But at the same time the appropriate balance is not either at the Continental Europe standard or to the left of it. Professionals are clearly undercompensated and their incomes artificially depressed in social democracies (cf. medical salaries in France), if wages are to in any way reflect productivity. And if wages reflect productivity, then logically the higher the wages, the more in savings, and the more in capital gains.