Inequality.org

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Institute for Policy Studies

Income Inequality

Download Chart PackIncome includes the revenue streams from wages, salaries, interest on a savings account, dividends from shares of stock, rent, and profits from selling something for more than you paid for it. Income inequality refers to the extent to which income is distributed in an uneven manner among a population. In the United States, income inequality, or the gap between the rich and everyone else, has been growing markedly, by every major statistical measure, for some 30 years.

Household and Family Income

Source: Emmanuel Saez, Center for Equitable Growth, June 2015

Source: Emmanuel Saez, Center for Equitable Growth, June 2015

 

Income disparities have become so pronounced that America’s top 10 percent now average nearly nine times as much income as the bottom 90 percent. Americans in the top 1 percent tower stunningly higher. They average over 38 times more income than the bottom 90 percent. But that gap pales in comparison to the divide between the nation’s top 0.1 percent and everyone else. Americans at this lofty level are taking in over 184 times the income of the bottom 90 percent.

 

 

The top 1 percent of America’s income earners have more than doubled their share of the nation’s income since the middle of the 20th century. American top 1 percent incomes peaked in the late 1920s, right before the onset of the Great Depression.

 

 

Inequality in America is growing, even at the top. The nation’s highest 0.1 percent of income-earners have, over recent decades, seen their incomes rise much faster than the rest of the top 1 percent. Incomes in this top 0.1 percent increased 7.5 times between 1973 and 2007, from 0.8 percent to an all-time high of 6 percent. The Great Recession in 2008 did dampen this top 0.1 percent share, but only momentarily. The upward surge of the top 0.1 percent has resumed.

 

Source: Statistics of Income Division, Research, Anlaysis and Statistics, Internal Revenue Service, Table 1, December 2015

Source: Statistics of Income Division, Research, Analysis and Statistics, Internal Revenue Service, Table 1, December 2015

 

The 1990s saw the annual incomes of the ultra rich explode in size. Between 1992 and 2002, the 400 highest incomes reported to the Internal Revenue Service more than doubled, even after the collapse of the dot.com bubble in 2000. In the early 21st century, the economic boom driven by the real estate bubble would more than triple top 400 average incomes before the 2008 economic collapse.

 

 

High levels of income concentration are pervasive across the country, but there are important differences among states. Connecticut has the highest threshold for entry into the top 1 percent. At least $677,608 in annual income is needed to be a member of this elite group in that state. That’s three times the minimum needed to be among the top 1 percent in bottom-ranking Arkansas. (place cursor on each state for detailed data)

 

Sources: Household income shares for the 0-99 percent, U.S. Census Bureau. Top 1 percent data, the World Top Incomes Database. Analysis by NPR, January 2015

Sources: Household income shares for the 0-99 percent, U.S. Census Bureau. Top 1 percent data, the World Top Incomes Database. Analysis by NPR, January 2015

 

Before the 1980s, lower-income earners owned a far larger portion of total U.S. income than they do today. How much more income would these earners be making today if the United States had the same distribution of income as the nation displayed in 1979? NPR found that Americans would experience income increases of at least $3,000 across all quintile levels, with the highest quintile owed an additional $17,311. The top 1 percent of earners would see a dramatic fall in their income, losing more than just $824,844.

 

Source: Congressional Budget Office, The Distribution of Household Income and Federal Taxes, Table 3, November 2014

Source: Congressional Budget Office, The Distribution of Household Income and Federal Taxes, Table 3, November 2014

 

The Congressional Budget Office defines before-tax income as “market income plus government transfers,” or, quite simply, how much income a person makes counting government social assistance. Analysts have a number of ways to define income. But they all tell the same story: The top 1 percent of U.S. earners take home a disproportionate amount of income compared to even the nation’s highest fifth of earners.

 

Source: Congressional Budget Office, The Distribution of Household Income and Federal Taxes, Figure 11, November 2014

Source: Congressional Budget Office, The Distribution of Household Income and Federal Taxes, Figure 11, November 2014

 

Since 1979, the before-tax incomes of the top 1 percent of America’s households have increased more than four times faster than bottom 20 percent incomes.

 

Source: Congressional Budget Office, The Distribution of Household Income and Federal Taxes, Figure 13, November 2014

Source: Congressional Budget Office, The Distribution of Household Income and Federal Taxes, Figure 13, November 2014

 

The Congressional Budget Office defines after-tax income as “before-tax income minus federal taxes.” After taxes, top 1 percent incomes are increasing even faster than before taxes. Before-tax income growth for the top 1 percent has averaged 174.5 percent since 1979. The after-tax increase: 200.2 percent. A progressive tax system should function to narrow income gaps between the affluent and everyone else. Over recent decades, America’s tax system has done no narrowing.

 

CEO Pay

Source: Institute for Policy Studies and AFL-CIO analysis of Bureau of Labor Statistics average hourly earnings data and corporate proxy statements, 2015

Source: Institute for Policy Studies and AFL-CIO analysis of Bureau of Labor Statistics average hourly earnings data and corporate proxy statements, 2015

 

In the United States today, unions have a much smaller economic presence than they did decades ago. With unions playing a smaller economic role, the gap between worker and CEO pay was nine times larger in 2013 than in 1980.

 

Wages

Source: A look at pay at the top, the bottom, and in between, Spotlight on Statistics, Page 2, U.S Bureau of Labor Statistics, May 2015

Source: A look at pay at the top, the bottom, and in between, Spotlight on Statistics, Page 2, U.S Bureau of Labor Statistics, May 2015

 

Wages in the United States, after taking inflation into account, have been stagnating for more than three decades. Typical American workers and the nation’s lowest-wage workers have seen little or no growth in their real weekly wages.

 

Source: Economic Policy Institute analysis of Kopczuk, Saez and Song (2010) and Social Security Administration wage statistics, November 2015

Source: Economic Policy Institute analysis of Kopczuk, Saez and Song (2010) and Social Security Administration wage statistics, November 2015

 

Between 1979 and 2007, paycheck income of the top 1 percent of U.S. earners exploded by over 256 percent. Meanwhile, the bottom 90 percent of earners have seen little change in their average income, with just a 16.7 percent increase from 1979 to 2014.

 

Source: Economic Policy Institute analysis of Bureau of Labor Statistics and Bureau of Economic Analysis data, January 2015

Source: Economic Policy Institute analysis of Bureau of Labor Statistics and Bureau of Economic Analysis data, January 2015

 

Productivity has increased at a relatively consistent rate since 1948. But the wages of American workers have not, since the 1970s, kept up with this rising productivity. Worker hourly compensation has flat-lined since the mid-1970s, increasing just 15.5 percent from 1979 to 2013, while worker productivity has increased 132.8 percent over the same time period.

 

Source: Economic Policy Institute analysis of Bureau of Labor Statistics and Bureau of Economic Analysis data, January 2015

Source: Economic Policy Institute analysis of Bureau of Labor Statistics and Bureau of Economic Analysis data, January 2015

 

Productivity has increased at a relatively consistent rate since 1948. But the wages of American workers have not, since the 1970s, kept up with this rising productivity. Worker hourly compensation has flat-lined since the mid-1970s, increasing just 15.5 percent from 1979 to 2013, while worker productivity has increased 132.8 percent over the same time period.