Yves Smith of Naked Capitalism this past weekend dismantled a small piece in the Wall Street Journal which had attempted to show that income disparity in the U.S. is not at an all time record. Back in the 1830s, Alexis de Tocqueville, author of Democracy in America, compared the compensation of French and American civil servants, with the king and President. What the Journal added was a comparison of the U.S. minimum wage with Goldman Sachs CEO Lloyd Blankfein's annual pay and bonus of $69 million in 2007.
But the King was almost certainly the richest and best paid individual in France. He made 8,000 times the most menial civil worker. Our disparity (minimum wage versus Lloyd Blankfein) at a mere 5,000+ isn't quite as bad, right?
But Blankfein was far from the best paid American. Forbes told us that the 400 highest earning taxpayers reported $105 billion in adjusted gross income. That averages $262.5 million. $262 million versus the minimum wage level of $13,100 gives a ratio of over 20,000 to one.
Now some will protest that the $105 billion probably includes one time windfalls, like the sale of major businesses. Doesn't wash. We are looking for the disparity top to bottom. I haven't seen any estimates for 2008 yet, and hedge funds had a rougher year, but the Institutional Investor ranking of top hedge fund managers for 2007 showed John Paulson at $3.7 billion, George Soros at $2.9 billion, and James Simons at $2.8 billion.
So the popular perception is right. The super wealthy today are better off than royalty of old. And it's not due to indoor plumbing, either.