Who Are the Top 1%? Most Aren’t In Finance, Fewer Still In Mortgages

In Finance, Occupy Wall Street Protests, Top 1% on November 17, 2011 at 2:17 am

Some chant “We Are The 99%”.  But who are the “1%”? 

The income cut-off for the Top 1% of earners is $343,927 of income, using 2009 IRS data. [1]   The 1% is a rather broad category.  While $344,000 is certainly a good salary, the “1%” metric lumps a $324,000 earner in with a film star earning $30 million each movie.

The Top 5% begins at $154,643.

The Top 10% starts at $112,124.

The Top 25 kicks in at $66,193 and the Top 50% cut-off is $32,396.

We hear often the 1% are Wall Streeters who “caused” the recession.  Occupy Wall Street is specifically organized as the “99%” vs. “1%” (Wall Street).  That is wrong.

A recent paper by Bakija-Cole-Heim show only one out of seven 1%’ers even work in Finance.  [2]  Larger proportions are corporate managers and executives or doctors and dentists.   The chart below shows the breakdown:

Profession Share of the Top 1% of Income: 2005 Data  
Executives, managers (non-finance) 31.0%
Medical 15.7%
Financial Professions (incl. Management) 13.9%
Lawyers 8.4%
Computers, Math, Engineering (non-finance) 4.6%
Not working or deceased 4.3%
Skilled Sales (non-finance, non-real estate) 4.2%
Blue collar or misc. service 3.8%
Real Estate 3.2%
Business Operations (non-finance) 3.0%
Entreprenuers not otherwise classified 2.3%
Professors and scientists 1.8%
Arts, media, sports 1.6%
All Other 2.2%
Chart by Author  
Source: see note [2] below.   

The vast majority of the Top 1% do not work in finance or banking, and of those who do, only a tiny percentage have anything to do with mortgages.   We are long past most people seeing a member of a minority group commit a crime and then extrapolate the crime as if every member of that minority group were somehow involved.  It is just stereotyping when people say ‘the top 1% caused the crisis’.  Surgeons, media celebrities and corporate executives at widget makers are no more guilty of causing the financial crisis than any average American.

When we think of high pay financial employment, what comes to mind?  Corporate finance managers like Controllers and CFOs, Wall Street stock analysts, investment bankers, stock brokers, venture capitalists, private equity principals, hedge fund managers, financial consultants, investment managers, mutual fund managers, stock market floor traders, commodity brokers and the like.  Not very many ever touch securitized mortgages or supervised the people who do.  Mortgage securitization included a very small group of people, some of whom worked at government sponsored enterprises Fannie Mae and Freddie Mac.   It is very probable some of those who actually worked in that corner of the financial world are unemployed or underemployed today, and a lot less likely to be in the Top 1%, Top 5% or even Top 10% of earners.

Occupy Oakland 99 Percent signs.jpg

The average age of the “1%” is 47.  [2]  This is not surprising as those are typically peak earning years.  It is worth noting some of the “1%” of the Reagan or Clinton boom years are retired or even deceased now because it often takes decades of schooling and experience to reach the upper echelons of income.  The “1%” of a pre-crisis year like 2007 is certainly a bit different than today’s “1%” on account of retirements, 2008-9 downsizing and the fact high earners often have highly variable income.   MC Hammer was a millionaire one year, bankrupt the next.  A full 26% of the Bakija-Cole-Heim sample own a closely held business (a/k/a entrepreneurs). [6] 

It is also interesting to look at the 1%’s marital status.  An atypically high 81% are maried.  About half of those have working spouses. [3]  Of the married top earners, 31% of the spouses are executives, supervisors and managers (non-financial), 21% of spouses are in Medical professions, 17% are blue-collar and miscellaneous service, and 14% work in government, teachers and social services. [2]   This shows very clearly people are marrying people from similar socioeconomic status (doctors marrying each other).  This is one probable cause of greater income inequality in recent decades.  As more women have entered the workforce, they have tended to marry men of similar socioeconomic status.  If workers marry similar workers at each level of income (e.g. $30,000 worker marries a $29,500 worker, $100,000 manager has a $99,000 manager spouse, etc.), it has the impact of doubling the differential between the families because of the second working spouse.  The impact is even more pronounced when comparing married upper earners (e.g. two $250,000 doctors) with a $30,000/year single parent. 

The chant “we are the 99%” rings false.  A $325,000/year lawyer is in the top 2% but honestly can say she is in the “99%”.  Should that $325,000 lawyer really stand at the edge of her cubicle and scream “I am the 99%!” to the (presumably oppressive) $345,000/year lawyer in the next cubicle?  The difference between the 2nd percentile and the 100th percentile is vast; it is the difference between our $325,000 lawyer and a minimum wage teenager who works part-time after school.

Despite claims to the contrary, top earners have actually been getting poorer during the last four years of IRS data.  The Top 5%’s income declined each year 2007 to 2010, dropping by more than 10% between 2006 and 2010 in inflation adjusted dollars. [4]  No surprise here because the wealthier have more variable incomes (e.g. self-employment business income, stock capital gains, bonuses, etc.), doing better than average in economic booms but drop by greater percentages in recessions.

Most of the “1%” do not work in finance.  Even of the 13.9% of  the “1%” who work in finance, most had nothing to do with subprime mortgage lending.   The idea of punishing today’s “1%” for mistakes made by the government and those few who worked in mortgage securitization in the 2000’s is just plain wrong.  The top 1% paid 38% of all federal income taxes and the top 1% paid more than the entire bottom 95% of taxpayers in 2007. [5]  Paying a “fair share” is subjective but it cannot be argued, as it often is, that the rich ‘do not pay taxes’ because they actually pay most of the income taxes.

For more on income inequality in New York City, please see my recent posts and



[2] Demographics on page 71 of  Spouse data on page 52.  Occupation data on page 54.

[3] Page 59 of



[6] Sample metrics on page 69 of

 Pictures from Wikipedia Commons.

  1. In the past 37 years, the median income for the bottom 90 has risen by 10 , whereas the median income for the top 1 has tripled.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: