What makes them the 1%?

It is amazing how the "1 percent" epithet, a reference to the top 1 percent of earners, has caught on in the United States and elsewhere in the developed world. In the United States, this 1 percent includes all those with a 2006 household income of at least $386,000. In the popular narrative, it's thickly populated with unscrupulous corporate titans, greedy bankers, and insider-trading hedge-fund managers. Reading some progressive economists, it might seem that the answer to all of America's problems is to tax the 1 percent more and redistribute the proceeds to everyone else.

Underlying this narrative is the view that this income is ill-gotten, made possible by Bush-era tax cuts, the broken corporate-governance system, and the conflict-of-interest-ridden financial system. The 1 percent are not people who have earned money the hard way by making real things, so there is no harm in taking it away from them.

This caricature is based on some truth. For instance, corporations, especially in the financial sector, reward too many executives richly despite mediocre performance.

But apart from tarring too many with the same brush, there is something deeply troubling about this narrative's reductionism. It ignores, for example, the fact that many of the truly rich are entrepreneurs; sports stars and entertainers; and professionals such as doctors, lawyers, consultants, and even some of our favorite progressive economists. In other words, the rich today are more likely to be working than idle.

But what might be the most important overlooked fact is that the rise in income inequality is not just at the very top, though it is most pronounced there. Academic studies suggest that the top tenth of income distribution in America and elsewhere is also moving farther away from the median.

This is an inconvenient fact for the progressive economist. "We are the 90 percent" sounds less dramatic than "We are the 99 percent." And for some of the protesters, it may not even be true.

Education gap

Perhaps most problematic, though, is that something other than plutocrat-friendly policies is largely responsible for the growing inequality. That is education and skills.