Aggregate Effects of Top 1%

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Some people argue that paying CEOs and others large salaries for their significant contributions to corporate wealth is just supply and demand. I won't argue here about the lack of competition and the cozy relationships on compensation boards which undercuts the requirements for free market supply and demand.

Let's speak at a more macro level. Consumers drive 70% of GDP. Earners in the top 1% of income have received 93% of the income growth since the depths of the Great Recession (Bloomberg). A surprising fact about those high earners. They only consume 21% of their income (Tax Policy Center).

Of the increase in GDP, 93% is consumed by the highest income earners. It's siphoned away from consumption, since they only spend such a small fraction of their income.


That is a big reason that GDP growth has been so anemic. The people who spend most of their income, the bulk of consumers, are not getting wage growth sufficient to support a rapidly growing economy, which would lead to more acceptable unemployment levels.