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Volume 15,  #1
It is not news that inequality in the distribution of income increased in
the 1990s. Numerous studies have shown that the incomes of the top
one-fifth of the population have grown much faster than those of middle
income families, while low income families have seen the smallest increases
in income. This is true of both the before- and after-tax distribution of
income. Unlike the 1980s, rising wage inequality has not been fully offset
by the equalizing impact of taxes and government
social programs.

What is news is the extent to which the recent rise in market income
inequality has been driven by a major increase in the income
share of the most affluent part of the population ? the top 1% of the
workforce.

Emmanuel Saez and Michael Veall (The Evolution of High Incomes in Canada,
1920 to 2000. National Bureau of Economic Research
Working Paper. 2003) have studied the income share of the top 1% by looking
at income tax data.

They find that the top 1% of all taxpayers increased their share of all
income from 9.3% in 1990 to 13.6% in 2000. Put another way, out of every $1
of Canadian income earned in 2000, 13.6 cents went to the very top 1%, up
from 9.3 cents a decade earlier. (The study looks at gross income minus
capital gains for all taxpayers aged 20 and over.)

The more than four percentage-point increase in the income share of the top
1% in the 1990s explains most of the seven  percentage point increase in
the income share of the top 10% in the 1990s, from 35.5% to 42.3%. Who are
the top 1%? In 2000, they were the 114,038 taxpayers who had a gross income
(not counting capital gains) of at least $145,774. The average income of
this group was $171,728. Most of the income of the top 1% comes from
earnings, and their increased income share has come mainly from an
increased share of earnings.

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