Who Are the High Earners?
By Arnold Kling
Overall, we estimate that the groups we study represent 15% to 26.5% of the individuals who comprise the AGI categories at and above the top 0.1%. Among the groups we study, non-financial public company CEOs and top executives are estimated relatively precisely and represent 2.0% to 6.4% of the very top AGI brackets.
AGI = Adjusted Gross Income. The groups that they study are: top-five executives of publicly traded firms; Wall Street Executives; partners of top law firms; and athletes and celebrities. They conclude that explanations for increased inequality at the top that focus on executive compensation are incorrect, because the top executives are a small fraction of the overall high earners.
I would feel more confident about their analysis if they could account for more of the high earners. They write
We suspect that some of the missing individuals are trial lawyers, executives of privately-held companies, highly paid doctors, and independently wealthy individuals who have a high AGI.
For 2004, to be in the top 1 percent of AGI, you needed to earn $309,160. To make it to the top 0.1 percent, you needed $1.4 million. To make it to the top 0.01 percent, you needed $7.2 million. To make it to the top .001 percent, you needed $31 million.
I think that there are a fair number of people who own small businesses or real estate who earn more than $300,000 a year. And I agree with the authors’ guess about doctors. But until we know for sure…
Tyler Cowen really likes the paper.