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Inequality Is Increasing

This Class Presentation examines the rising levels of inequality and its impact on society and individuals.

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    Inequality is Increasing

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    How Much Income Inequality Exists in the United States?

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    Lowest 20% of recipients 4.5 4.8 5.4 5.1 4.6 4.2 12.2 24.0 12.2 23.8 11.6 24.3 10.8 23.8 9.7 22.9 12.0 23.4 41.3 40.9 41.6 44.3 47.7 42.7 1950 1960 1970 1980 1990 2001 17.4 17.8 17.6 17.5 16.6 15.4 Second quintile Third quintile Fourth quintile Top 20% of recipients Family income before taxes 3.5 4.4 10.4 24.0 8.7 23.0 44.9 50.1 Before After 14.6 16.3 Impact of taxes & transfers on 2001 household income Sources: Bureau of the Census, Current Population Survey , Series P - 60; Statistical Abstract of the United States : 1995 , Table 733; Congressional Budget Office, 1994 Green Book ; and Bureau of the Census, Money Income in the United States: 2002 . Share of Money Income by Quintile • Income inequality fell in the 1950s and 1960s, but since the 1970s it has been increasing. • Due to transfer programs and the progressive taxation of income, after tax and transfer income is more equal than before tax income.

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    Factors Influencing Income Distribution • A high portion of annual income inequality is due to differences in: • age, • education, • family size, • marital status, • number of earners in the family, and, • time worked. • Young, inexperienced workers, students, single - parent families, and retirees are over - represented among those with low incomes.

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    Bottom 20% of income recipients 9.0 32.0 44.0 24.0 34.0 58.0 13.0 79.0 8.0 3.0 Percent with less than high school Percent with college degree or more under 35 35 - 64 65 and over Education of householder 49.0 51.0 7.0 93.0 Married - couple family (% of total) Single - parent family (% of total) 2.9 3.4 Source: U.S. Dept. of Commerce, Money Income in the United States: 2001 (Washington, D.C.: Government Printing Office 2002) Top 20% of income recipients Age of householder (percent distribution) Family status Persons per family 0.8 2.2 Earners per family 10.0 25.0 % of total hours worked supplied by group 13.0 63.0 % of married couple families in which wife works full - time High and Low Income Families, 2001

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    Why Has Income Inequality Increased? • Income inequality in the U.S. has increased due to the growth of: • Both single - parent and dual - earner families as a share of the total, • Earnings differentials on the basis of skill and education, • The number of “winner - take - all” markets, and, • The reported income of those in the top tax bracket due to lower marginal tax rates.

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    Income Mobility and Inequality in Economic Status

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    Income Mobility • Annual income data hide the movement of people up and down the income distribution over time . • Tracking of household income over time shows there is considerable movement both up and down the income spectrum .

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    Top paid quintile 53.2 25.8 23.6 12.9 6.5 12.6 27.5 20.7 10.9 4.3 11.0 25.7 53.3 23.2 5.7 3.0 14.9 31.1 23.7 28.3 36.3 22.6 4.3 6.4 12.4 Next highest quintile Middle quintile Next lowest paid quintile Lowest paid quintile Source: Katherine Bradbury and Jane Katz, “Women’s Labor Market Involvement and Family Income Mobility When Marriages End,” New England Review , Fourth Quarter 2002, pages 41 - 74. Highest quintile Next - highest - quintile Middle - quintile Next - lowest - paid quintile Lowest - paid quintile Percentage Distribution by Income Status of Family in 1998 Income Status of Family in 1988 Income Mobility • The table above allows for us to see how families in each income bracket in the U . S . fared 10 years later . • Does it appear to you that there is a significant amount of income mobility in the U . S . Economy?

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