Income Inequality in the United States

Income and wealth inequality have been topics of particular interest in the United States as both measures have grown to alarming proportions in recent decades. Between 1980 and 2020 the wealthiest 10% of Americans increased their ownership of national wealth from ~65% to ~75%, the top 1%’s share rose from ~22% to ~38%, and the top 0.1%’s share rose from ~8% to ~18% (Saez & Zucman, 2020). The patterns for income inequality have followed in similar fashion as evidenced below.

A Gini index for national income of 30 or below is considered low, 30 to 50 medium, and 50 or above high.

While clear trends in the change of distribution may not be evident year to year, they are quite evident decade to decade – notice how the top 5%’s share of national income rose by 7 points from 1969 to 2019, and the 5th quintile, or top 20%’s share rose by 9 points in the same period, whereas every other quintile’s piece of the national income pie decreased by at least 2 percentage points from 1969 to 2019.

Only the top three income groups earning 100,000 dollars or more per year saw their share of the national income pie increase whereas every other group’s share of the pie decreased. In particular, the highest earning group making 200,000 dollars or more per year saw a remarkable rise in their share of the pie in the last 5 years. Hover over a line to see its value, or select/deselect groups in the legend.

Although real incomes have roughly a little more than doubled over the past 70 years, the ratio of mean to median incomes has also increased, suggesting that a greater share of that rise is going to individuals above the median income level.

While the median income grew about 100%, or 2-fold, from 1947 to 2019, the Dow Jones Industrial Average grew 15,667%, or about 158-fold, over that same period – therefore, anyone who was unable to consistently invest in the stock market or another similarly appreciating asset over this time period – which was the majority of the population – missed out on a lot of wealth accumulation over these decades.

The ratio of male to female mean income which peaked in the mid-1960s at around 2.5:1 and has since fallen to about 1.5:1 as of 2019.

Income inequality tends to be concentrated in states with particularly large metropolitan areas like New York City, Los Angeles, Chicago, and Washington D.C., which tend to have a higher concentration of extremely high income individuals and have also seen a greater rise in income inequality between 2010 & 2018.

Sources:

Central Intelligence Agency. (2020). COUNTRY COMPARISON :: DISTRIBUTION OF FAMILY INCOME - GINI INDEX. Retrieved December 03, 2020, from https://www.cia.gov/library/publications/the-world-factbook/rankorder/2172rank.html

Population Reference Bureau. (2020). Data Center: US Data. Retrieved December 01, 2020, from https://www.prb.org/usdata/indicator/gini/snapshot/

Saez, E., & Zucman, G. (2020). The Rise of Income and Wealth Inequality in America: Evidence from Distributional Macroeconomic Accounts. Journal of Economic Perspectives, Volume 34(Number 4), fall 2020, 3-26. doi:10.1257/jep.34.4.3.

US Census Bureau. (2020, July 21). Income Inequality. Retrieved November 04, 2020, from https://www.census.gov/topics/income-poverty/income-inequality.html