Inequality: Who are the 1 per cent?

New Scientist, 30 July 2012 by Alison George
Magazine issue 2875.

http://www.newscientist.com/article/mg21528752.100-inequality-who-are-the-1-per-cent.html

"We are the 99 per cent" is the slogan of the Occupy protest movement. It highlights the fact that 1 per cent of the US population controls 40 per cent of the wealth. So who are these super-rich?

The world now has more billionaires than ever - 1226 of them, according toForbes magazine. But you don't need billions to be in the top 1 per cent of earners. As of 2010, annual earnings before tax of around $350,000 sufficed in the US. £149,000 put you in that slim top tier in the UK.

The real concern for everyone from Occupy protesters to US president Barack Obama is not how rich these people are, but how much richer they are than everyone else. In recent decades, surging wages for top earners - and stagnation of pay for low earners - has widened the gulf between the haves and have-nots.

We've been here before. In the early 20th century, wealth was likewise concentrated in the hands of the few - mainly a class of "rentiers" whose income largely derived from inheritance and land ownership. Since that time, at least in the US, UK, Canada and Australia, the share of income accrued by the very richest people has followed a U-shaped trajectory (see graph), dropping after the Great Depression and the second world war and plateauing until the late 1970s, when the "Great Divergence" began.

What's more, the composition of the top 1 per cent has completely changed. Now most of the wealthiest people aren't rentiers, but entrepreneurs or highly paid employees. In the UK, two-thirds work in finance, while in the US a third are company execs, 14 per cent work in finance and 16 per cent in the medical profession. Together, members of the richest percentile take home a fifth of all income in the US, according to data from economist Emmanuel Saez of the University of California, Berkeley.

What caused top-tier wages to soar is debated, although globalisation and the impact of technology on the way we work are key factors. Changing social norms may also play a role, says Saez, pointing to the recent lifting of the "outrage constraint" that once kept exceptionally high pay in check.

Being in the top 1 per cent takes on a new significance when you consider the global picture. The poorer half of the world's population hold just 1 per cent of global wealth. Even those who scrape into the richest 1 per cent in the US, earning $350,000, are easily in the world's richest 0.1 per cent, earning more than 300 times the global average, according to the anti-poverty organisation, Giving What We Can.

These dramatic figures capture the vast distance between the very wealthiest and everyone else. The 1 per cent are not simply at the pinnacle of material wealth, they are also on the outermost edge of a widening chasm.

Alison George is an opinion editor at New Scientist