The once-stable incomes of America’s biggest earners now fluctuate dramatically from year to year. And as go the rich, so goes much of the economy.
During the past three recessions, the top 1% of earners (those making $380,000 or more in 2008) experienced the largest income shocks in percentage terms of any income group in the U.S., according to research from economists Jonathan A. Parker and Annette Vissing-Jorgensen at Northwestern University. When the economy grows, their incomes grow up to three times faster than the rest of the country’s. When the economy falls, their incomes fall two or three times as much. The super-high earners have the biggest crashes. …Because the stock market is up to 20 times more volatile than overall economic growth, the market-based fortunes of the wealthy are now more unsteady. Fast-moving global capital is also creating more asset bubbles, which have become their own self-destructing wealth machines.
By Robert Frank, Oct. 22, 2011, WSJ (from his new book, "The High-Beta Rich" )
Source: WSJ 10/22/11