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Amid job stagnation, a prosperous class grows

A small group of very well-paid workers is earning a third of the nation’s wages. Why?

August 25, 2014 10:45AM ET

From 2000 to 2012, American workers as a whole had a tough time, as population grew much faster than new jobs and many people gave up looking for work. There was one major exception: jobs paying $100,000 to $400,000 (in 2012 dollars).

This is what I call America’s new prosperous class. Many of these workers have an advanced degree. They no longer struggle, but they continue to work because their wealth is far from adequate to support their lifestyles.

The number of prosperous-class jobs soared to 10.8 million, an increase of 2.1 million since 2000. That is almost 10 times the growth rate of jobs paying either more or less.

Most astonishing is how much of the overall increase in wages earned by the 153.6 million people with a job in 2012 went to this narrow band of very well paid workers: Just 7 percent of all jobs pay in this range, but those workers collected 76.9 percent of the total real wage increase.

This rise of the prosperous class illustrates a fundamental shift in the economy — as wrenching and potentially enriching as the country’s 19th century transition from an agricultural nation into an industrial one. The change this time is to a knowledge economy in which big bang after big, big bang in science rapidly expands our expertise and mastery of our world, both physical and conceptual, and with it our wealth. 

Managers of wealth

What sort of workers are these? In our infotech age, the jobs that pay in the low to middle six figures tend to be in several categories, all of which require extensive education, polished skills and often a government license.

Many of them serve the rich, not as household help but as managers of wealth: accountants, bankers, investment advisers, lawyers, business managers and money managers.

Others work in the fast-growing medical field, spurred by an aging population and new technologies. In 2012 the median pay — half make more, half less — for general surgeons was $187,200, according to the Bureau of Labor Statistics. For dentists the median was $145,240, a little less than pediatricians and nurses specializing in anesthesiology.

Median wages of petroleum engineers hit $130,280, reflecting the sophisticated skills needed to find and extract oil and natural gas from deep beneath the earth’s surface.

Comparative data

I calculated the figures on prosperous-class pay using the W-2 wage reports that every employer sends to the Social Security Administration, which measure cash compensation for labor and thus give us a solid picture of the cash income from work. The data are also the source of my last two columns, which analyzed gross pay for those earning less than $40,000 and more than $2 million.

For those making less than $20,000, wages rose slightly, thanks to the three minimum wage increases signed into law by President George W. Bush in 2007, when the economy still seemed to be humming. Average pay slipped a bit for those making $20,000 to $40,000, who did not benefit from the minimum wage hikes.

For those making more than $2 million, whose average pay in 2012 was just over $5 million, I found significant drops in average pay, total pay for this group, the number in this group and their share of all wages.

Those not born with the capacity for mentally demanding jobs will face a less prosperous future than their forebears in the industrial era, when brawn and hard work often paid well.

In 2012 those in the prosperous class earned on average $154,772, which was $1,162 more than in 2000; that’s an increase of just seven-tenths of 1 percent.

So how did this well-paid group collect more than three-quarters of all the increased wages in the United States? Because their ranks grew from 8.7 million workers in 2000 to 10.8 million in 2012.

The number of such jobs grew because the skills needed in modern America command higher pay. Not everyone with an advanced degree will make this kind of money, but those with only a high school education or a four-year degree are much less likely to benefit than those with professional, master’s or higher degrees. We are likely to see more evidence of this shift in coming years.

What about workers further up the income ladder, those making $400,000 to $2 million? Their ranks also expanded, up 22.3 percent, to just under 613,000 jobs in 2012. Their average pay was $674,132. Average pay slipped almost $16,000, or 2.3 percent, from 2000 because many of the added jobs were near the bottom of this wage bracket.

That leaves one group to analyze: workers making $40,000 to $100,000, a category that includes many cops, teachers, office workers and unionized blue collar workers. In 2012 there were 42.9 million jobs in this pay category, down a tad from the 43.1 million in 2000.

That decline in the number of jobs fits with cuts in local government employment and the offshoring of factory work to China, Mexico, Vietnam and other low-wage countries.

Average pay for these workers rose by $693, or 1.1 percent, according to my analysis, with the increases concentrated near the top of this group. That is another, though weaker, sign that the market rewards workers who develop skills that add value. 

A changing economy

What all these figures tell us is that the American economy is changing in more than one way: not simply from manufacturing jobs to service jobs but also through the rise of jobs that require expert knowledge, analytical skills and judgment. The wrenching part is that it suggests those not born with the capacity for mentally demanding jobs face a less prosperous future than their forebears in the industrial era, when brawn and hard work often paid well.

Seen broadly, the prosperous class actually consists of 11.4 million workers: the 10.8 million in the low six figures plus the more than 600,000 making $400,000 to $2 million. They may be doing much better than their individual salaries suggest, too, because of marriage among economic equals. Many of these prosperous-class workers are in households with two professionals — a lawyer married to an engineer, an executive married to a professor, a doctor married to a doctor. In those cases, their household prosperity is much greater than the individual worker data indicate.

In the years ahead, all else being equal, this group of highly paid workers is likely to grow in number and enjoy even bigger paychecks. What is less clear is whether their political influence will grow in tandem with their share of wages.

Editor's note: The text has been changed to correct for a math error.

David Cay Johnston, an investigative reporter who won a Pulitzer Prize while at The New York Times, teaches business, tax and property law of the ancient world at the Syracuse University College of Law. He is the best-selling author of “Perfectly Legal,” “Free Lunch” and “The Fine Print” and the editor of the new anthology “Divided: The Perils of Our Growing Inequality.”

The views expressed in this article are the author's own and do not necessarily reflect Al Jazeera America's editorial policy.

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