It is getting much harder to earn big bucks in America, my new analysis of official wage data shows.
The number of workers making $2 million or more per year declined almost 5 percent, from 39,650 in 2000 to 37,714 in 2012. This decline is especially remarkable, given 11 percent population growth.
These top jobs paid less too, despite 22 percent real growth in the economy over those 12 years. Measured in 2012 dollars, average pay at the top was $5.04 million, down from $5.27 million in 2000. That’s 4.3 percent less pay per top worker.
Combined, the decline in big bucks jobs and average pay meant top earners got a smaller slice of the national wage pie. The pie grew 7.2 percent. But the $2 million and up workers saw their slice shrink from 3.4 percent to 2.9 percent.
Now why should the typical worker care about this trifecta of bad news for high earners? After all, just one worker in about 4,100 makes this kind of money. What does it possibly matter to ordinary Americans that bosses who make as much in a year as they may earn for a lifetime of labor are squeezed a bit?
It matters because falling pay at the top can become a powerful tool for change. U.S. representatives and senators may not care much what a typical constituent thinks, but they do care about what the highest-paid Americans think, because they donate to campaigns.
If those at the top come to see that they share the travails of most other Americans, it increases the prospect of government policy changes that will grow our economy. We need to invest in the future of America for our economy can grow, which will make everyone, from custodians to CEOs, better off.
Up or down together
This is a story about the income of high earners. Income and wealth are not the same. Wealth is property — assets, from stocks and land to fine art. Income is earnings, primarily from work. Assets are soaring in value, but not paychecks.
The declines in inflation-adjusted top pay show that workers are all in this together, rich and poor — a lesson President Theodore Roosevelt taught as he fought for policies that helped create America’s middle class and a century of prosperity. We need to inject his wise words into our civic debate.
“The fundamental rule in our national life — the rule which underlies all others — is that, on the whole and in the long run, we shall go up or down together,” he told Congress in 1901.
Let’s talk about how overall, U.S. workers earn less today than they did in 2000.
By cutting investments in the future of America, Congress is making us worse off than need be. Spending more on basic research, on fixing up and improving our infrastructure and investing in higher education will more than pay for itself today and make us all richer in the future.
The mentality that taxes rob us holds America back. On the contrary, tax dollars can enrich everyone — a core idea that the Constitution’s framers knew and taught but that we have forgotten, along with Roosevelt’s insight.
The eye-opening figures on the earnings of those making $2 million or more come from the most comprehensive, precise and reliable source of income data in the U.S. It covers just one component of the money people receive — wages and salaries — but that explains roughly 70 cents out of each dollar of total individual income.
W-2 forms show wages, salaries, overtime, bonuses and profits from stock options, which are taxed as cash wages. Most fringe benefits are excluded from this data, meaning it provides an excellent though not quite perfect measure of cash compensation. When it comes to people’s sense of financial security and freedom to save or spend as they choose, it is cash income that matters the most.
Employers send W-2 forms to their workers and to the Social Security Administration. Social Security then adds the W-2s down to the penny and each year breaks them into fine categories, as small as $5,000 brackets, with a top bracket of $50 million or more.
What the data show
My column last week showed, using this data, that over the same 12 years the lowest-paid workers in the United States got a real pay increase while those making $20,000 to $40,000 in 2012 dollars saw their average pay dip slightly. The under-$20,000 workers enjoyed a small real average increase in pay because of three minimum wage hikes promoted by Democrats and passed with votes from 82 House Republicans and all but four Senate Republicans. President George W. Bush signed the hikes into law.
Social Security issues finely detailed breakdowns of wages by income brackets, but the brackets are fixed, which typically means that inflation adjustment of the same income groups is not possible. But since 2012 prices were exactly a third higher than in 2000, we can make some comparisons using inflation-adjusted dollars.
The wage bracket from $1.5 million to $3 million in 2000 is equivalent to the $2 million to $4 million bracket in 2012. And that means we can also look at jobs paying $4 million or more. Here in the rarified air of the top earners, something really interesting took place.
First, consider those making $2 million to $4 million: Their numbers plummeted, down 41 percent, from the 29,866 such workers in 2000 to 17,750 in 2012. Their average pay fell too, from $3 million in 2000 to $2.4 million in 2012.
For workers paid $4 million or more, the story is nuanced. Their ranks more than doubled — from 9,784 in 2000 to 20,164 a dozen years later. But their average pay plummeted by $4.7 million — a 39.2 percent decline. Average pay was $12 million in 2000 but $7.3 million in 2012.
Consequently, the highest of the very highly paid are dominating, yet they are not being paid nearly as well as their 2000 counterparts, probably because of smaller profits from exercising stock options.
These shrinking jobs and pay figures, together with those reported in last week’s column, should transform our debate about pay. The data demonstrate that the bottom two-thirds of workers and the highest paid few have a common cause in seeking pay raises.
Let’s start talking differently about our economy. Let’s talk about how overall, U.S. workers earn less today than they did in 2000. Let’s talk about how to get America a pay raise, both for workers paid under $40,000 and those paid than $2 million. Let’s talk about how all workers are in this together.