One in 34 Americans earned not a single dollar in 2009, according to new Social Security Administration data. At the same time, salaries at the very top of the spectrum grew by more than “fivefold,” according to a report on Tax.com by David Cay Johnston, a winner of the Pulitzer Prize and a professor at Syracuse University.
The new data hold important lessons for economic growth and tax policy and take on added meaning when examined in light of tax return data back to 1950.
The story the numbers tell is one of a strengthening economic base with income growing fastest at the bottom until, in 1981, we made an abrupt change in tax and economic policy. Since then the base has fared poorly while huge economic gains piled up at the very top, along with much lower tax burdens.
A weak foundation cannot properly support a massive superstructure, as the leaning Tower of Pisa shows. The latest wage data show the disastrous results some of us warned about, although like the famous tower, the economy only lists badly and has not collapsed.
Measured in 2009 dollars, total wages fell to just above $5.9 trillion, down $215 billion from the previous year. Compared with 2007, when the economy peaked, total wages were down $313 billion or 5 percent in real terms.
The number of Americans with any wages in 2009 fell by more than 4.5 million compared with the previous year. Because the population grew by about 1 percent, the number of idle hands and minds grew by 6 million.
These figures show, far more powerfully than the official unemployment measure known as U3, how both widespread and deep the loss of jobs was in 2009. While the official unemployment rate is just under 10 percent, deeper analysis of the data by economist John Williams at https://www.shadowstats.com/ shows a real under- and unemployment rate of more than 22 percent.