"Super-Rich" Aren't the Same from Year to Year

For the 2011 season in Major League Baseball, the average salary for the top 25 highest-paid baseball players is $19,751,000, with Alex Rodriguez of the New York Yankees leading MLB at a salary of $32 million, according to the USA Today Salaries Database.  In comparison, during the 1988 season the average salary for the top 25 highest-paid players was $1.955 million, or $3.657 million in today's dollars.  The highest paid player that year was New York Mets catcher Gary Carter, who made $2.36 million that year, or $4.41 million in 2011 dollars.  

With those data in mind, consider this commentary from Kevin Williamson at NRO:

"Are the rich really getting richer? That’s a pretty standard line from the Left, a lament usually cited in the course of calling for higher tax rates. Robert Reich is particularly fond of this mode of attack: A recent post of his was headlined, “For 70 years, the wealthy have grown wealthier.” Professor Reich probably doesn’t write his own headlines, but it’s a common enough sentiment for him, and his prose is rich with phrases such as “the super-rich got even wealthier this year.”

MP: The flaw in Robert Reich's analysis is that he is assuming that "the wealthy" in one year are the same exact group as "the wealthy" in a subsequent year.  In the baseball example above, it would be like assuming the same 25 highest-paid players in 1988 were the same 25 highest-paid players in 2011, with an income five times greater and a greater concentration of income among the "super-rich."  But we know that's not true, the highest-paid players in 2011 are a completely different group than the top-25 in 1988, just like the top 1% of Americans by income or wealth in one year are a completely different group than the 1% in a different year.  

Here's more from Kevin:

"When somebody says that the top 1 percent saw its income go up by X in the last decade, they are not really talking about what happened to actual households in the top 1 percent. Rather, they are talking about how much money one has to make to qualify for the top 1 percent. All that really means is that the 3 million highest-paid Americans in 2010 made more money than did the 3 million highest-paid Americans in 2000, the 100,000 highest-paid Americans this year made more money than did the 100,000 highest-paid Americans made in 2000, that the 50,000 highest-paid Americans made more money this year than did the 50,000 highest-paid Americans made in 2000, that the 1,000 highest-paid Americans this year made more money than did the 1,000 highest-paid Americans made in 2000, etc., which is not shocking. But, as the Treasury data show: They are not the same people.

When Robert Reich writes that “super-rich got even wealthier this year,” he is making a statement that is not true in most cases — 75 percent of the Clinton-era super rich were not members of the Obama-era super rich. In fact, Treasury found:

• Income mobility of individuals was considerable in the U.S. economy during the 1996 through 2005 period with roughly half of taxpayers who began in the bottom quintile moving up to a higher income group within ten years.
• About 55 percent of taxpayers moved to a different income quintile within ten years.
• Among those with the very highest incomes in 1996 — the top 1/100 of one percent — only 25 percent remained in the group in 2005. Moreover, the median real income of these taxpayers declined over the study period.
• The degree of mobility among income groups is unchanged from the prior decade (1987 through 1996).
• Economic growth resulted in rising incomes for most taxpayers over the study period: Median real incomes of all taxpayers increased by 24 percent after adjusting for inflation; real incomes of two-thirds of all taxpayers increased over this period; and median incomes of those initially in the lower income groups increased more than the median incomes of those initially in the high income groups.  

Or, as the authors of the study put it: “While the share of income of the top 1 percent is higher than in prior years, it is not a fixed group of households receiving this larger share of income.” 

Bottom Line: For Robert Reich to say that "the super-rich got even wealthier this year" implies that the "super-rich" this year is the same fixed group of "super-rich" as last year that are now even wealthier, when that is not an accurate description of reality.  It would be like saying "the super-rich baseball players in 2011 got even wealthier than in 1988," without acknowledging that the "super-rich" in 2011 are a completely different group of players than in 1988. 

HT: Pete Friedlander