Inequality Is Increasing

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Inequalityis Increasing

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How Much IncomeInequalityExists in the United States?

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Lowest20% ofrecipients4.54.85.45.14.64.212.224.012.223.811.624.310.823.89.722.912.023.441.340.941.644.347.742.719501960197019801990200117.417.817.617.516.615.4SecondquintileThirdquintileFourthquintileTop20% ofrecipientsFamily income before taxes3.54.410.424.08.723.044.950.1BeforeAfter14.616.3Impact of taxes & transfers on 2001 household incomeSources:Bureau of the Census,Current Population Survey, Series P-60;Statistical Abstract of the United States:1995, Table733; 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 sincethe 1970s it has been increasing.•Due to transfer programs and the progressive taxation ofincome, after tax and transfer income is more equal thanbefore tax income.

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Factors InfluencingIncome Distribution•A high portion of annual income inequalityis 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 areover-represented among those with lowincomes.

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Bottom 20%of incomerecipients9.032.044.024.034.058.013.079.08.03.0Percent with less than high schoolPercent with college degree or moreunder 3535-6465 and overEducation of householder49.051.07.093.0Married-couple family (% of total)Single-parent family (% of total)2.93.4Source:U.S. Dept. of Commerce,Money Income in the United States:2001 (Washington, D.C.: Government Printing Office 2002)Top 20%of incomerecipientsAge of householder(percent distribution)Family statusPersons per family0.82.2Earners per family10.025.0% of total hours workedsupplied by group13.063.0% of married couple familiesin which wife works full-timeHigh and Low Income Families, 2001

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Why HasIncome Inequality Increased?•Income inequality in the U.S. has increaseddue to thegrowthof:•Bothsingle-parent and dual-earner familiesas a share of the total,•Earningsdifferentials on the basis ofskill and education,•Thenumber of “winner-take-all” markets,and,•Thereported income of those in the top taxbracket due to lower marginal tax rates.

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Income Mobility andInequality in EconomicStatus

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Income Mobility•Annualincomedatahidethemovementofpeopleupanddowntheincomedistributionovertime.•Trackingofhouseholdincomeovertimeshowsthereisconsiderablemovementbothupanddowntheincomespectrum.

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Top paidquintile53.225.823.612.96.512.627.520.710.94.311.025.753.323.25.73.014.931.123.728.336.322.64.36.412.4Next highestquintileMiddlequintileNext lowestpaid quintileLowest paidquintileSource:Katherine Bradbury and Jane Katz, “Women’s Labor Market Involvement and Family Income Mobility When MarriagesEnd,”New England Review, Fourth Quarter 2002, pages 41-74.Highest quintileNext-highest-quintileMiddle-quintileNext-lowest-paid quintileLowest-paid quintilePercentage Distribution by Income Status of Family in 1998Income Status ofFamily in 1988Income Mobility•ThetableaboveallowsforustoseehowfamiliesineachincomebracketintheU.S.fared10yearslater.•DoesitappeartoyouthatthereisasignificantamountofincomemobilityintheU.S.Economy?

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