Excellent Excellent information in this article. Lots of excellent graphs. Worth the read.
http://sociology.ucsc.edu/whorulesamerica/power/wealth.htmlThe Wealth Distribution
In the United States, wealth is highly concentrated in a relatively few hands. As of 2004, the top 1% of households (the upper class) owned 34.3% of all privately held wealth, and the next 19% (the managerial, professional, and small business stratum) had 50.3%, which means that just 20% of the people owned a remarkable 85%, leaving only 15% of the wealth for the bottom 80% (wage and salary workers). In terms of financial wealth (total net worth minus the value of one's home), the top 1% of households had an even greater share: 42.2%. Table 1 and Figure 1 present further details drawn from the careful work of economist Edward N. Wolff at New York University (2007).
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Historical context
Numerous studies show that the wealth distribution has been extremely concentrated throughout American history, with the top 1% already owning 40-50% in large port cities like Boston, New York, and Charleston in the 19th century (Keister, 2005). It was very stable over the course of the 20th century, although there were small declines in the aftermath of the New Deal and World II, when most people were working and could save a little money. There were progressive income tax rates, too, which took some money from the rich to help with government services.
Then there was a further decline, or flattening, in the 1970s, but this time in good part due to a fall in stock prices, meaning that the rich lost some of the value in their stocks. By the late 1980s, however, the wealth distribution was almost as concentrated as it had been in 1929, when the top 1% had 44.2% of all wealth. It has continued to edge up since that time, with a slight decline from 1998 to 2004, before the economy crashed in the late 2000s and little people got pushed down again. Table 3 and Figure 4 present the details from 1922 through 2004.
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If you wonder how such a large gap could develop, the proximate, or most immediate, factor involves the way in which CEOs now are able to rig things so that the board of directors, which they help select -- and which includes some fellow CEOs on whose boards they sit -- gives them the pay they want. The trick is in hiring outside experts, called "compensation consultants," who give the process a thin veneer of economic respectability.
The process has been explained in detail by a retired CEO of DuPont, Edgar S. Woolard, Jr., who is now chair of the New York Stock Exchange's executive compensation committee. His experience suggests that he knows whereof he speaks, and he speaks because he's concerned that corporate leaders are losing respect in the public mind. He says that the business page chatter about CEO salaries being set by the competition for their services in the executive labor market is "bull." As to the claim that CEOs deserve ever higher salaries because they "create wealth," he describes that rationale as a "joke," says the New York Times (Morgenson, 2005, Section 3, p. 1).
Here's how it works, according to Woolard:
The compensation committee
talks to an outside consultant who has surveys you could drive a truck through and pay anything you want to pay, to be perfectly honest. The outside consultant talks to the human resources vice president, who talks to the CEO. The CEO says what he'd like to receive. It gets to the human resources person who tells the outside consultant. And it pretty well works out that the CEO gets what he's implied he thinks he deserves, so he will be respected by his peers. (Morgenson, 2005.)
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