How Inequality Has Changed The Past 40 Years

Six charts that explain how inequality in the United States changed over the by xx years

The U.S. Bureau of Economic Assay, in late 2021, updated its data series on income inequality in the United States. This update adds data for 2019 and extends the data back to 2000, making this a very useful series for agreement how economic inequality evolved over the past two decades.

Below, we've assembled vi charts that show how loftier-, heart-, and low-income households experienced inequality over the first two decades of the 21st century.

Inequality is rising

The new data testify that economical inequality continues to ascent. Our first chart shows growth in disposable personal income in each twelvemonth between 2001 and 2019. Each bar is subdivided to show where growth went. The blue sections bespeak growth that went to households in the bottom half of the U.S. income distribution. That is, blue confined represent all households in the state that earn less than the median household income. The warmer colors—xanthous, scarlet, and orange—represent groups with higher incomes. Notably, meaning percentages of growth in every year flow to the acme 10 percent of households, which are represented on the graph by the yellow and cerise sections of each bar. (See Figure i.)

Figure 1

One easy manner to meet that inequality is increasing is to compare average personal income growth—which is the number near commonly reported past the media—to growth for particular groups of U.S. households. Our 2d chart breaks the population into deciles of income, with the lowest-income households on the left side of the graph, showing that for the vast bulk of Americans, "headline" growth in disposable personal income overstates income growth for households in their decile. Only the very highest decile beats average income growth, and those in the meridian v per centum and top i pct of the distribution beat it by large margins. (See Figure 2.)

Figure 2

Inequality rose at a like rate in the two well-nigh recent economical expansions

The adjacent chart shows how growth was subdivided in the 2002–2007 economic recovery from the dot-com bubble of 2001 and the 2009–2019 recovery from the Great Recession of 2007­–2009. In both of these expansions, growth patterns were like.

In both recoveries, the bottom 50 percent of households received around 20 percent of economic growth in the expansion, despite representing 50 percent of the population. The "upper 40" grouping, which includes households to a higher place the 50th percentile of household income and below the 90th percentile, received about 42 percentage of full growth in both periods, suggesting that this group is receiving a relatively off-white share of growth. (See Figure 3.)

Figure 3

Low-income households had poor wage growth while high-income households registered strong business profits and asset-price rises

Next upward are three charts that bear witness how specific components of income contributed to the economic fortunes of the lesser 50 percent of households, the upper xl percent, and the top x percent by income.

In the bottom fifty per centum of households, wages and authorities transfer programs—economic parlance for social infrastructure programs, such as Unemployment Insurance, that underpin the economic system during downturns—make upwardly the vast majority of all income. Accordingly, these categories matter far more than others for determining income growth in this group.

Wage growth was relatively weak for the bottom 50 percentage of households in the first two decades of the 21st century. The vast majority of income growth for this group came thanks to authorities transfers, such as the Affordable Intendance Act, more than commonly chosen Obamacare and more formally known as the Patient Protection and Affordable Care Human activity of 2010. Obamacare boosted this group'southward income significantly when it was implemented in 2014 and 2015. Health insurance provided what is known every bit a social transfer in-kind, meaning it doesn't give money but gives a valuable service to people that they would otherwise have to pay for. That's why Obamacare was a boost to incomes overall. (Run into Figure 4.)

Effigy 4

The story for the upper twoscore percent of households is similar. Households in this group likewise go most of their income from wages, just they nonetheless receive some government transfers.

Unlike the bottom fifty percent of households, the upper 40 percent holds assets, and involvement and dividend income from these assets represents about 8 percent of their total income in 2019. This grouping experienced robust wage growth in most of the expansionary years, providing the majority of income growth for this group. (See Effigy 5.)

Figure 5

And so, there's the pinnacle 10 percent of households, which boasts diverse sources of income that include wages, interest and dividends earned on assets, and business income. Notably, too, the BEA information series does not include capital gains, which would significantly increase the incomes of the top ten percent of households past income. So, this should be considered a low approximate of superlative ten per centum income growth over the period.

This group enjoyed very strong wage growth, which was further supplemented by sources of upper-case letter income that are mostly concentrated in this group, fifty-fifty when capital gains are excluded. (See Figure 6.)

Figure 6

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