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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: GraceZ who wrote (51885)	1/28/2006 4:52:19 PM
From: GST	Read Replies (1) \| Respond to of 110194

<Personally, I think it was a terrible mistake to attach health benefits to employment because it drastically raises the cost of employing older workers.> Health care costs should be pooled at the highest level of aggregation possible. This is one area where the US has it wrong.

To: GraceZ who wrote (51885)	1/29/2006 12:44:37 PM
From: shades	Read Replies (1) \| Respond to of 110194

More cherry picked data Grace? home.comcast.net delong.typepad.com January 28, 2006 The Very Top of the U.S. Income Distribution Mark Thoma is wishing he had already found time to read Piketty and Saez (2006), "The Evolution of Top Incomes: A Historical and International Perspective" (Cambridge: NBER WP 11955: Abstract: This paper summarizes the main findings of the recent studies that have constructed top income and wealth shares series over the century for a number of countries using tax statistics. Most countries experience a dramatic drop in top income shares in the first part of the century due to a precipitous drop in large wealth holdings during the wars and depression shocks. Top income shares do not recover in the immediate post war decades. However, over the last 30 years, top income shares have increased substantially in English speaking countries but not at all in continental Europe countries or Japan. This increase is due to an unprecedented surge in top wage incomes starting in the 1970s and accelerating in the 1990s. As a result, top wage earners have replaced capital income earners at the top of the income distribution in English speaking countries. We discuss the proposed explanations and the main questions that remain open. Thoma reproduces what are by far the most interesting figures in Piketty and Saez, which show that the pretax income share of the top 1% of the American income distribution jumped from 8% in 1980 to 9% in 1985 to 13% in 1990 to 17% in 2000 to 14% today. Over the same period the income share of the next 4% has risen from 13% to 15%, and the income share of the still next 5% has stayed at 12%. The top tenth of the American income distribution increased its share from 33% in 1980 to 41% today--with three-quarters of that increase going to the top 1% and fully one-quarter of that increase going to the top 0.01%. What skills and assets do the top 1% of America's pretax income distribution have today that lead the market to grant them 14% of total income, when their counterparts back in 1980 were granted only 8% of total income? What skills and assets do the top 0.01% of the American pretax income distribution--that's 12,000 tax units--that led the market to grant them 100 times average income in 1980, and 300 times average income today? The flip side: econlog.econlib.org He cites this paper by Thomas Piketty and Emmanuel Saez. I suspect that two things are going on. One is that we have added a lot more low-income households, because of immigration and family break-ups. This pushes some high-income households into the top of the income distribution who previously were closer to the middle. The second development is increased entrepreneurship, which takes some people out of the middle of the income distribution and moves them either toward the bottom or the top. For example, suppose that we have one hundred families, and the top family gets $1.8 million, the next family gets $1.7 million, the next family gets $1.6 million, and so on, until the tenth family gets $0.9 million. Families 11 through 100 each earn $40,000. Total income is $18 million, and the share of income earned by the top one percent (the top earner) is 10.0 percent. Next, add 100 new families, consisting of immigrants, single-parent households, and so on, earning $30,000 per year. The total income in the economy is now $12 million, so the share of the top earner has declined a bit. However, with 200 families in the population, the top one percent now includes the top two earners, whose combined income of $3.5 million is now 16.67 percent of the total. The other factor is entrepreneurship. For me, becoming an entrepreneur meant that for several years, my income went down. It increased when the business became successful, and it spiked when the business was sold. Since then, it has been below what I would have earned as a salary, but the one-time spike makes up for that. As Paul Graham put it, Economically, you can think of a startup as a way to compress your whole working life into a few years. The rise of the personal computer has increased the potential for entrepreneurship. More entrepreneurship means that more people are compressing their working lives and generally increasing the variation in incomes.