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Sunday, June 17, 2018

Dec. 10 (Bloomberg) — From 2009 to 2012, the U.S. experienced a significant economic recovery, in which average real income growth jumped by 6 percent. That’s the good news. The bad news is that almost all of that increase — 95 percent — was enjoyed by those in the top 1 percent of the income distribution.

To appreciate this remarkable finding, set out in an important paper by University of California economist Emmanuel Saez, we need to add some context. From 2007 to 2009, the recession produced a 17.4 percent decline in average real income — the largest drop since the Great Depression. Every income class was hit hard, but in percentage terms, those at the top of the economic ladder suffered the biggest decreases.

During the recovery — from 2009 to 2012 — members of the top 1 percent have enjoyed a big boost in their average income: 31.4 percent. As Saez shows, this figure almost wiped out the loss from the recession, returning the top 1 percent to essentially where it was in 2007.

By contrast, the remaining 99 percent saw measly growth of 0.4 percent, about a 30th of the 11.6 percent loss they experienced in the recession. By the end of 2012, the bottom 99 percent wasn’t close to where it was in 2007.

If we go back to 1993, we can see how extreme these patterns have been. Under Presidents Bill Clinton and George W. Bush, the U.S. enjoyed significant expansions. Both expansions were quite lopsided in favor of the top 1 percent, but at least everyone gained.

In both periods, the top 1 percent did great, enjoying annual income growth of 98.7 percent (under Clinton) and 61.8 percent (under Bush). The bottom 99 percent did well, too, with annual gains of 20.3 percent under Clinton and 6.8 percent under Bush.

It should be plain that during both expansions, the U.S. saw nothing close to the disparities of the first years of the current recovery.

Here’s another way to see the point. From 1993 to 2012, the top 1 percent has enjoyed an increase of 86.1 percent in annual income, with the rest of us getting 6.6 percent. That means the top 1 percent received 68 percent of total income growth over the period — a high figure, but much lower than the whopping 95 percent from 2009 to 2012.