There is no debate that those at the apex of the income spectrum in the United States—the top 1 percent, or even top 0.1 percent—earn much more than that group did 35 years ago. But who exactly are these earners and how has the composition at the tippy top of the income ladder changed over the decades? This information is less well established and less well known. Now, a new paper by economists from the University of Minnesota, Princeton University, and the Social Security Administration sheds new light onto the identity of top earners and the changes in the group since the 1980s.
The authors, Fatih Guvenen, Greg Kaplan, and Jae Song, focus their paper on the changing gender balance in the top 1 percent of earners. Namely, they document the increase in women among the top earners. They are able to do this by using data from the Social Security Administration that is very detailed and lets the authors look at the large share of U.S. population.
The data show a clear trend: women are increasingly members of the top 1 percent. Looking at earnings averaged over 1981 to 1985, women were only 1.9 percent of the top 0.1 percent and only 3.3 percent for the rest of the top 1 percent. But about 30 years later, from 2008 to 2012, women were 10.5 percent of the top 0.1 percent and 17 percent of the rest of the top 1 percent. This increase is quite large, but women remain extremely underrepresented at the very top of the earnings distribution.
Now what accounts for this change? The authors note the general increase in female labor participation does not fully explain the change: the share of women in the bottom 99% did not increase as sharply.
Perhaps changes in the kinds of occupations and industries that get individuals into the top end of the distribution have contributed to less gender imbalance. Guvenen, Kaplan, and Song’s paper confirmed what earlier research shows: the financial services industry dominates the top 1 percent. For an average of 2008 through 2012, 31 percent of earners in the top 1 percent worked in the finance industry. This dominance is a marked difference from the early 1980s when the health services industry was dominant.
But this shift really can’t explain the rise of female top earners because there isn’t a large gender variation across industries. Women haven’t risen to the top because the high-earning financial services industry employs more female top earnings than the old high-earning industries.
So what does account for the change? The authors argue that the “glass ceiling,” which blocks women from entering the top ranks, is thinning. But they also point out women once had difficulty staying in the top ranks, calling this phenomenon the “paper floor.” During the 1980s and 1990s, women were far more likely to fall out of the top 1 percent and the top 0.1 percent of earners. By the late 2000s, however, women were about as likely as men to fall out of the top ranks. What’s more, women have caught up with men in their increasing ability to remain at the very top of the ladder.
Overall, the report finds that the likelihood of an earner staying in the top 0.1 percent the next year was 57 percent in 2011, compared to a probability of about 45 percent during the 1980s and 1990s. As the authors put it, “Top earner status is thus becoming more persistent, with the top 0.1 percent slowly becoming a more entrenched subset of the population.” Policymakers and the public may be concerned about the total amount earned by the very top, but perhaps now they should add mobility in and out of this group to their list of concerns.