Is Paul Krugman in the top 1 percent?

It was recently reported that Paul Krugman will be paid $225,000 in his first year at CUNY, his new academic institution. Some pundits have called Krugman a hypocrite for accepting such a high salary, given his regular criticism of the top 1 percent. However, when combined with his other sources of income, does the salary actually put Krugman in the top 1 percent of earners? This blog post will attempt to find out by providing plausible lower and upper bounds for Krugman's yearly income, and then comparing these to plausible cut-off points for the top 1 percent of earners in the US.

Krugman probably has five main sources of income: his academic salary, his salary as a columnist for the New York Times, speaking fees, investment returns, and royalties from his best-selling textbook. The first figure we know, namely $225,000. Interestingly, as the Daily Beast article (link above) points out, Krugman was probably making even more than $225,000 per year when he was at Princeton, which may imply that Krugman's detractors could have been calling him a hypocrite even before his move to CUNY.

Regarding his salary as a columnist, New York Magazine reports that columnists at the New York Times are paid between $150,000-350,000 per year. In a separate article, it reports that Thomas Friedman, another famous columnist at the New York Times, earns $300,000 a year. Therefore, a reasonable lower bound for Krugman's salary as a columnist is $150,000, and a reasonable upper bound is $300,000.

Regarding his speaking fees, Krugman has written two short pieces, Me and Enron and My Connection with Enron, One More Time concerning his business with the former energy company Enron. In the first, he writes, "I was routinely offered as much as $50,000 to speak to investment banks and consulting firms." In the second, he writes, "In 1998-1999 my normal fee for a one-hour business speech in Boston or New York was $20,000". These figures are consistent with speaking fees for other top economists. For example, according to the paper by Chan et al. (link in previous sentence), Joe Stiglitz's minimum speaking fee is around $30,000. In calculating the lower bound, I will assume that Krugman gives one talk every two years, which makes his annual income from speaking $10,000. In calculating the upper bound, I will assume that he gives two talks per year, which makes his annual income from speaking $40,000.

Regarding his investment returns, Krugman won the 2008 Nobel prize in economics, which was worth 10 million Swedish Krona. He was awarded the prize in October, at which time one could get about 0.135 dollars for a Swedish Krona. His prize money in dollars was therefore $1.35 million. I will assume conservatively that Krugman invested some of this money in 10-year government bonds, which then yielded a return of around 4%, and that he currently has no other sources of capital income. In calculating the lower bound, I will assume he invested 25% of the money, which makes his annual income from capital $13,500. In calculating the upper bound, I will assume he invested 75% of the money, which makes his annual income from capital $40,500. (Thanks to Simon Wan for finding the data on government bond yields.)

Regarding his textbook royalties, all I have to go on is this statement that he made in 2010: "I'm the co-author of two college textbooks, and royalties from the intro one are a large part of our family income." In calculating the lower bound I will assume, completely arbitrarily, that by "large" he meant $25,000. And in calculating the upper bound, I will assume that he meant $75,000.

Overall then, what is Krugman's total pre-tax income? A plausible lower bound is $225,000 + $150,000 + $10,000 + $13,500 + $25,000 = $423,500. And a plausible upper bound is $225,000 + $300,000 + $40,000 + $40,500 + $75,000 = $680,500. Does this put him in the top 1 percent of earners?

The lowest cut-off point for the top 1 percent that I could find for 2012-or-later was $394,000, a figure that was cited in both a CNBC article and an Oregonian article. The highest cut-off point that I could find was $521,411, a figure that was cited in an article at Investment U. These two figures are similar to the lower and upper cut-off points for 2009 reported in this article at Bankrate. Consequently, if the upper bound for Krugman's total income is correct, then he is almost certainly in the top 1 percent, but if the lower bound is correct, then he might not be in the top 1 percent. If the average of the upper and lower bounds is correct, then he is very likely to be in the top 1 percent.