Sunday, November 6, 2011

America’s Growing Income Gap, by the Numbers

by Braden Goyette ProPublica

The nonpartisan Congressional Budget Office recently released a much-discussed study [1]showing that over the past three decades the income of the highest-paid Americans has soared while the income of others has grown much more modestly. Here’s a rundown of some statistics illustrating the growing income gap.

But first, some context. These numbers reflect income, not wealth. So a retiree who owns two houses and three cars may be far better off than someone with a higher annual income, two kids in college and a mortgage. It’s worth noting that income includes investment income and capital gains.

Also, although a 2010 Organization for Economic Cooperation and Development study suggests that there is less income mobility [2][PDF] in the United States than in many other developed countries, someone in the richest 1 percent this year may have been in an entirely different category 30 years ago. Take Bill Gates. In 1979, Gates was 24, and Microsoft hadn’t even incorporated. He was likely in the bottom tier of earners.  More recently, of course, he has easily been in the top 1 percent. According to a 2007 Treasury Department study [3] [PDF], “roughly half of taxpayers who began in the bottom income quintile in 1996 moved up to a higher income group by 2005.”

Third, though income growth has been unequally distributed, real income for all groups has grown over the past three decades.

In spite of those caveats, the gap between richest and poorest is far greater than it used to be. All income numbers have been adjusted for inflation, and all household income data are adjusted for differences in household size [1] [PDF; see Appendix A]. Please note that different subsections take different years as a baseline.

(Update, 11/4) You can also find out how income inequality in your county ranks compared to other parts of the U.S. using this interactive chart [4].

 

Overall income growth for the country as a whole

Disposable [5] personal income per capita [6]:



















1980$18,822
1990$23,542
2000$28,911
2010$33,125


 

All figures in constant 2005 dollars. Source: Census.gov [7]

 

Unevenly distributed growth















Top 1% of Households275%
Poorest Fifth of Households18.3%
Middle Fifth of Households35.2%


 

Source: Congressional Budget Office [8]

 

 























19792007
Top 1% of Households10.5%21.3%
Poorest Fifth of Households2.9%2.5%
Middle Three Fifths of Households47.8%38.5%


 

Source: Congressional Budget Office [8]

 

Large gains for the highest earners, modest gains for the rest































1980199020002007
Top 1% of Households$339,200$586,000$1,038,700$1,319,700
Poorest Fifth of Households$14,800$14,800$16,500$17,700
Middle Fifth of Households$42,600$45,000$50,400$55,300


 

All figures in constant 2007 dollars. Source: Congressional Budget Office [9]

 

Decline in median individual income for men, slight gains for women throughout the 2000s
























1995200020052010
Men$32,051$35,885$34,929$32,137
Women$17,232$20,338$20,747$20,831


 

All figures in constant 2010 dollars. Source: Census.gov [10]

 

Comparison to other countries

Income inequality on a scale from 0 to 1, 1 being the most unequal:























France0.239
Poland0.305
Greece0.307
United States0.378
Mexico0.476


 

Source: Bertelsmann Stiftung [11]

Correction (11/3): One of the charts in this post incorrectly stated that the 81st-99th percentiles accounted for 28.6 percent of U.S. income in 2007. In fact, they accounted for 38.6 percent of U.S. income.

 

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