The ranks of millionaires may still be rising in America, due largely to stock market rebounds, but it's not a smooth climb for those in the top income brackets.
One of the latest surveys, from Phoenix Marketing International, reports that households with at least $1 million in investable assets rose 8 percent from June 2009 to June 2010. But as two economists from Northwestern University point out, income among the top earners in the U.S. has become much more volatile since the early 1980s, and they link it to increased access to a global market.
In a paper presented at a Brookings Institute conference, researchers Annette Vissing-Jorgensen and Jonathan Parker reported that beginning in the 1980s, the top 1 percent of income in the U.S. began rising at a rate of 11 times the average income, and was 2.4 times more cyclical. Prior to the 1980s, the ratio of cyclicality to high income was less for the high-earners than for everyone else.
So what does this mean? The wealth gap between the top 1 percent and the rest of the population has been growing over the past three decades, despite the volatility in income among that group. Even though the stock market crash reduced wealth across the board, those who are most heavily invested seem to be recovering their former wealth faster than those who are counting on the value of their home. Perhaps this volatility -- both in income and investing --- is the "new normal."
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