Income-inequality

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Income inequality: US Household Income History 1967-2001

Income Inequality Trend Continues: 1967-2001 US household income gap widens as the slice of American income pie shrinks for 80% of wage earners.

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U.S. Census Bureau Historical Income Tables - Income Equality

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In the graph below, each line represents 20-percent of income earners or "quintiles." The average earner in the Q5 group earned about $130,000 in 2001 and the lowest group, Q1 earned about $10,000. Over the 34-year period shown on the graph, Q1 earnings were essentially flat, while Q5 earnings almost doubled. This trend forms the basis of the growing income gap.

Graph 1. Income growth in dollars, by quintile. Note the highest income group (Q5) has risen at a much higher rate than the other quintiles.

Graph 2. Aggregate Income as a percentage of total national income. This is how the "income pie" has been sliced from 1967 to 2001. Note that the highest income quintile (Q5) has seen its slice get bigger, while every other group's slice has gotten smaller.

Income Inequality Data source: US Census Bureau

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Prices, wages, and Real Average Earnings

Clearly, as shown on Graph 1, the top quintile of wage earners have seen far better income gains than the other four quintiles. Remember each quintile represents 20% of earners. As shown on Graph 2, over 50% of the nation's income goes to the top 20% of the earners. More striking is the dire situation for Q1, where the bottom 20% only earns about 4% of the total national income.

As the top 20% earners continue to pull away from the rest, the nation will become dominated by a politically-powerful wealthy class, supported by a debt-ridden working class.

Not much middle class.

It won't happen right away. It will be gradual and we'll have time to "get used to it" and blame ourselves¹. But the data shows where we are headed unless the current trends are reversed. They will not be reversed unless people become much more politically active. The United States does have a mechanism for change, called free speech, free press, freedom of petition, freedom of assembly, and voting rights. The question is whether a majority of Americans will take up the challenge to preserve a good life for their children and grandchildren, or if they will allow themselves to be diverted by the vast assortment of clever distractions aimed at all of us.

The Center on Budget and Policy Priorities (CBPP) is an excellent source of data and a respected research organization that pays close attention to income distribution, poverty, and health care coverage in the United States. In the link below, CBPP provides a summary of key statistics for 2004 and shows that real median income (income adjusted for inflation) is down for 2004. The CBPP reports 2004 median incomes are down, poverty is up, health care coverage is down.

There is no question, the United States is, for now, a great country with a strong middle class. The question, though, is what happens as these income inequality trends continue? The major news media mostly report point-in-time data. It is more important to know what the historical trends are, and where they are headed.

What happens to the middle class forty years from now? Or 200-years from now? How will that the gap between rich and poor change the structure of our society? Will our society come to resemble something more like Mexico's? The U.S. Gini Coefficient trend indicates a widening income gap with more wealth concentrated in the hands of the few. If the current trends continue, the wealth distribution of the United States, as measured by the Gini Coefficient, will resemble Mexico's.

What will the widening income gap mean with respect to access to property ownership and college education necessary to achieve professional status? What policies will stop or reverse the current trends? In order to lower the taxes on the top earners, the politicians like to say to us all, "remember, it's your money." When will they say: "remember, they're your grandchildren?"

Keywords: Income inequality, US household income by quintile, income gap, median income, aggregate income, Gini coefficient,

¹In his book Hard Times: An Oral History of the Great Depression, author Studs Terkel interviewed many who fell into poverty during Great Depression. One of the extraordinary psycho-social revelations of these interviews is the degree to which the victims of the collapsed economy felt ashamed of themselves. They felt they were individual failures. They didn't blame "the system."