Even Among the Richest of the Rich, Fortunes Diverge

WASHINGTON — YES, we know the economic fortunes of the 99 percent and 1 percent have diverged over the last three or four decades. But the fortunes of the 1 percent and the 0.1 percent, or the 0.01 percent, or the 0.001 percent, have diverged even more. Economists have taken to calling it “fractal inequality.” It is not just that the rich have pulled away from the average American. It is that the richer you are, the more you have pulled away.

Consider some data from the World Top Incomes Database, put together by researchers at institutions including the Paris School of Economics and the University of California, Berkeley. It found that in 2012, the average household in the bottom 90 percent of the income distribution earned about $30,997. For the average household in the top 1 percent, the figure is $1,264,065, and for the top 0.1 percent, about $6,373,782.

Put another way, our 0.1 percent household made about 206 times, and our 1 percent household about 41 times, what our average household did. That gap has yawned over time. In 1990, for instance, the same multiples were 87 and 21. In 1980, they were 47 and 14.

To understand how that has happened, it helps to understand who the 1 percent and the 0.1 percent are. A broad range of professions are represented — artists and doctors and inheritors, lawyers and miners and university professors. But about two in five income earners who make it into the top 0.1 percent in a given year are executives, managers or supervisors. And one in five comes from the world of finance.

For that reason, the extremely rich tend to cluster in big cities that are financial centers or home to corporate headquarters — New York, Los Angeles, San Francisco, Chicago, Washington and Houston. (The coasts are overrepresented, the Midwest underrepresented.) They are much more likely than the 99 percent to have a graduate degree or a college education. Just 8 percent of the 1 percent has a high-school education or less, versus nearly 40 percent of the 99 percent.

Management has always been overrepresented among top earners, of course. What has changed is what they are paid. About 70 percent of the increase in income going to the top 0.1 percent from 1979 to 2005 comes from increasing pay for executives and financial services professionals, researchers estimate.