Few understand how the gap between the wealthiest 1 percent and the rest of the United States’ population has grown so enormous in the last few decades. In fact, it has not been clear who these one-percenters are. In the early 2000s, scrutiny turned to the growing salaries of top executives at publicly-traded companies such as Home Depot and Oracle. But according to economists Joshua Rauh, an associate professor of finance at the Kellogg School of Management, and Steven Kaplan, a professor at the University of Chicago, it is worth taking another look. After all, top executives of “Main Street” companies comprise only 5 percent of the top .01 percent wealthiest people in the United States—a division whose members earned individual salaries of at least $7.2 million per year in 2004.

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Instead, “Wall Street” employees—including investment bankers and managers of hedge funds, mutual funds, and private equity funds—have become increasingly common members of the richest classes. According to Rauh and Kaplan’s report on who contributes to the rise in the nation’s highest incomes, the combined yearly income of the top 25 hedge fund investors exceeds the combined income of the top five hundred executives listed in the S&P 500 index. That sum was $6.3 billion in 2004 and it has been rising ever since. Rauh says, “By 2007, the top five investors likely made more than the combined five hundred executives at publicly-traded companies in the U.S.” Thus, the intense focus on Main Street executives has not been entirely justified. “S&P 500 executives—Main Street CEOs—have taken quite a beating in terms of public perception of their compensation,” Rauh says, “but when you look over time, their share of top incomes has been pretty constant, whereas groups on Wall Street have increased in a dramatic way.” Tracking Down Wealth Details on the salaries of Wall-Street high-rollers have always been difficult to obtain. While publicly-traded firms report executive salaries to the Securities and Exchange Commission, investment banks report little information on employee compensation. The authors used careful data analysis combined with statistical models to estimate how much managers on Wall Street earn. They looked at company reports to find out how much a firm paid out in total compensation as well as the number of managing directors. Through interviews, Rauh and Kaplan learned that managing directors at investment firms typically make upward of $500,000 per year, and at least a quarter of managers earn over $2.5 million per year, one of many facts they used to calibrate their estimates. They used similar methods of analysis for calculating the salaries of other high-earning professionals, namely corporate lawyers, athletes, and celebrities. They estimated corporate lawyer salaries by figuring out the profit of the law firm and dividing that among partners and non-partners.

Collectively, top CEOs, athletes, and corporate lawyers make far more money than they did a decade ago, beyond increases expected from inflation.