Incomes rise for bottom 99 pct; US inequality still worsens

Solid job growth is finally boosting paychecks for the rest of us.

Incomes for the bottom 99 percent of American families rose 3.3 percent last year to $47,213, the biggest annual gain in the past 15 years, according to data compiled by economist Emmanuel Saez and released Monday by the Washington Center for Equitable Growth.

Read MoreEven millionaires live paycheck to paycheck

"For the bottom 99 percent of income earners, this marks the first year of real recovery from the income losses sparked by the Great Recession," Saez, a professor at the University of California-Berkeley, said in a summary of his findings.

The increase likely reflects robust hiring last year when employers added 3.1 million jobs - the most since 1999. That lowered the unemployment rate to 5.6 percent from 6.7 percent a year earlier. Strong job gains and a falling unemployment can help broadly raise incomes as businesses are forced to offer higher pay to attract workers.

Paycheck statement
Chris Basiaga | iStock | 360 | Getty Images

With more money in their wallets, Americans are spending more freely. Auto sales reached the highest level in nearly a decade in May. Sales of clothing and building materials also jumped last month. And home sales are at an eight-year high.

Still, income inequality worsened in 2014. The richest 1 percent of Americans posted a much bigger increase in pay: their incomes soared an average of 10.8 percent to $1.3 million. The wealthiest 1 percent also captured 21.2 percent of all income in 2014, up from 20.1 percent the previous year.

The top 10 percent of income earners also boosted their share in 2014, receiving 49.9 percent of total income, up from 48.9 percent in 2013.

Who has the biggestF1 paycheck?

Yet there was progress outside the richest 10 percent. Families in the bottom 90 percent of income-earners saw their incomes increase 2.8 percent, or about $900, to $33,068. That matched 2007's increase as the largest bump up since 1998.

Most Americans still have a long way to go to recapture the sharp losses they suffered during the 2008-2009 recession. Average incomes for the bottom 99 percent plummeted 11.6 percent to $45,269 in those two years, Saez calculates. All figures are adjusted for inflation. They have so far recovered just 40 percent of their losses.

The inequality figures are likely a big reason that many Americans remain concerned about the economy. The nation has 3.3 million more jobs than before the recession and the overall economy is larger than it was in December 2007, when the downturn began. But for most families the recovery is far from complete.

Saez's figures are compiled from IRS tax data, using pre-tax income that excludes government transfer payments, such as Social Security retirement income. Saez and another economist, Thomas Piketty, have closely documented the growing share of income captured by the richest 1 percent. Their data fueled the Occupy Wall Street protests in 2011.

Some critics of their work have pointed out that excluding government benefits exaggerates income disparities. But other sources, such as the Congressional Budget Office, have included the impact of taxes and benefits and found wide, if less-pronounced, wealth gaps.

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