Census Data Shows Income Inequality Hasn't Changed Much in 20 Years


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An “imaginary hobgoblin” – that’s what economics and finance professor Mark Perry called the so-called rise in income inequality in an article published yesterday for the American Enterprise Institute.

In other words, according to data from the U.S. Census Bureau, the notion that the rich keep getting richer while the unwashed masses scramble for far fewer coins from the high mucky-mucks’ overflowing pockets is apparently a load of bull.

In his readably short but info-packed analysis, Perry, a professor at the University of Michigan, points out that the percent of total income in the U.S. hoarded by the evil top 20 percent isn’t actually much different than it was all the way back in 1993:

In 1993, 48.9% of total income went to the top quintile of US households, and 21 years later in 2014, the share of income going to the top 20% has increased to only 51.2%. Likewise, in 1993 the share of total income going to the top 5% of US households was 21.0%, and that share had increased to only 21.9% last year. Interestingly, the 21.9% share of income earned by the top 5% last year was lower than the share that group earned in 8 of the last 15 years. Over the last two decades, the income share of the top 20% (top 5%) has been remarkably stable at about 49-51% (21-22%) and there has been no statistical evidence of “rising income inequality” according to this measure.

Perry also points to the Gini index, which is used to measure overall income inequality on a scale of zero (total equality) to 100 (total inequality) percent. From Perry’s analysis of the data:

Like the first two measures above, the Gini index measure of income dispersion reveals that there has been no significant trend of “rising income inequality” for US household incomes in recent decades. The Gini index in 1993 was 0.454 and last year it was 0.480, a slight decrease from 0.482 in 2013, and this statistical measure of income inequality has shown remarkable stability for the last several decades in a narrow range between 0.46 and 0.48.

It's a no-brainer that rich people make more money than...well, not-rich people, and that there are statistically fewer of them. So income inequality is bound to exist in one fashion or another, even as the 30-to-40 percent tax rate on that top tier tries to even things out a bit. But the rate of income inequality doesn't appear to have skyrocketed anytime in recent memory.

As a matter of fact, the U.S. Census Bureau Chart Perry cites in his article shows data going all the way back to 1967. That year, the top 20 percent of U.S. households brought in 43.6 percent of the total U.S. income. In the 47 years since, the top 20 percent’s shares of income increased by about 7.4 percent. Only 2.3 percent of that increase has taken place over the last 21 years, including many dips and bumps along the way.

Similarly, the top five percent of U.S. households banked 17.2 percent of all U.S. income in 1967. By 2014, nearly half a century later, that amount had increased to 21.9 percent – an increase of 4.7 percent. Only .9 percent of that increase has occurred since 1993.

MRC Merch

MRC Merch