The Washington PostDemocracy Dies in Darkness

The 99 percent just had its best year in nearly two decades

Delegates watch as President Bill Clinton addresses the Democratic National Convention in Charlotte on Sept. 5, 2012. (AP/Jae C. Hong)

The vast majority of American workers are finally seeing their incomes rise from the depths of the Great Recession, a new analysis from one of the world's leading scholars of economic inequality suggests. But incomes for the top 1 percent continue to rise substantially faster.

The analysis of Internal Revenue Service data on pre-tax earnings, from UC-Berkeley economist Emmanuel Saez and published by the Washington Center for Equitable Growth think tank, finds incomes increased by 3.9 percent last year for the bottom 99 percent of U.S. families. That's the strongest growth those workers have seen since 1998, but it's still not enough to repair all the damage the recession wrought on those workers: As Saez notes, those families on average have only regained two-thirds of the income they lost during and after the financial crisis.

The top 1 percent, in contrast, have now regained almost all the income they lost during the recession. Their incomes grew by 7.7 percent, almost double the rate of the bottom 99 percent of workers, in 2015. Other work this spring has also suggested typical worker income growth is accelerating, including an analysis by former Clinton administration economic adviser Rob Shapiro that finds mounting income gains for young workers in particular in recent years.

The numbers carry a mixed blessing for President Obama and his economic legacy. They bolster a case that he, Vice President Biden and presumptive Democratic presidential nominee Hillary Clinton continue to press: that the economy has rebounded from a devastating crash and that typical workers are beginning to feel the benefits, though they still have much ground to make up.

But Saez tosses cold water on Democrats' hopes that a signature Obama policy — a late-2012 tax deal that allowed tax rates to rise on the highest income earners — will prove to be anything but a small speed bump for rising income inequality. It does not appear to be limiting income gains at the top.

"The higher top tax rates, which started in 2013, did not prevent broadly shared economic growth from picking up in 2014 and especially 2015," Saez writes. "At the same time, they did not have a significant impact on reducing pre-tax income inequality. ... Therefore, it seems unlikely that U.S. income concentration will fall much in the coming years, absent more drastic policy changes."

There's new evidence this week from the International Monetary Fund that inequality since 2000 may have grown larger, and hurt the economy more, than previously thought. The IMF reported an "astonishing" number of households fell out of the middle class and into a lower income bracket between 2000 and 2014.

The very rich spend less money as a share of their income than the poor and the middle class, which matters for consumption and economic growth. Since 1998, the IMF found, the increased concentration of wealth at the top has drained the U.S. economy of what amounts to more than a full year of consumer spending.