Economics, U.S. Economy

Census Data show income inequality in the United States has been flat since 1994

Income inequality has been getting lots of attention lately, and one of the main topics of debate is whether income inequality in the United States has been increasing over time. And if income inequality is increasing, has it been accelerating in recent years, or even “exploding” as Jonathan Chait claimed? The Census Bureau has an extensive historical database of statistics on household income and income inequality, and the graphs below were prepared using Census data (Tables E-1 and F-4) to chart the trends in income dispersion over time to help answer those questions.

The graphs display three different measures of income dispersion from 1967 to 2010: the share of total U.S. income going to the highest-income quintile (top 20 percent) of American households, and Gini coefficients (a statistical measure of dispersion that is one way to quantify income inequality) for both U.S. households and families. As can be seen in the top chart, all three measures of income dispersion have gradually increased over time, but most of the increases occurred in the earlier period between 1967 and 1994. Starting in the mid-1990s, the three measures of income inequality stalled out and barely changed in the 16 years from 1994 to 2010 (see bottom chart of just the 1994-2010 period).

When income inequality stabilized around 1994, the share of total U.S. income going to the highest-income quintile was 49.1 percent, and 16 years later in 2010 that income share was essentially unchanged at 50.2 percent. Likewise, over that period the Gini coefficients increased only slightly, from 45.6 percent to 46.9 percent for U.S. households, and from 42.6 percent to 44 percent for families. The trends displayed in the two charts are completely contrary to the common narrative that the 1960s, 1970s, and 1980s were decades of much greater income equality than in recent years, when supposedly the incomes of “the rich” skyrocketed and income inequality “exploded.”

Bottom Line: According to three different Census Bureau measures, income inequality in America increased only gradually from the 1960s through the mid-1990s, but since then has remained relatively constant. Therefore, the factual record of income data in the United States certainly doesn’t support the claims that income inequality has “exploded” recently. A more accurate description of income inequality over the last several decades would be to say that it “flat-lined” starting in about 1994.

10 thoughts on “Census Data show income inequality in the United States has been flat since 1994

    • If the share for the top 20% isn’t growing, but the share for the top 1% is, you can sort out what’s happening to the share for the 80th-98th, right?

      • Actually you can’t. Imagine that the top 1% grew by 100 times, and the 80-98th (20 times the people) dropped by 5, the average still flatlines.

    • If you’re not in the top 20%, it makes no difference to your situation how the top 20%’s income is distributed. Why obsess about 1% of the population that isn’t affecting your quintile?

      Is the Gini suddenly not the measure of income disparity?

      • I have no problem talking about the measure of income disparity. I have a problem with Perry misrepresenting Chait’s claim as well as the mountain of research on income inequality that recognizes quintiles are far more stable.

  1. 1. Chait referred to the “very rich” while you’re pointing at the top quintile. Those are two entirely different things.

    2. Chait noted that it “exploded” “over the last few decades”, which includes your period of stronger growth.

    You seem to be distorting the claim when you make this point. Of course a broader income group had a more stable income share. I know you want to make this point, but don’t misrepresent what others are pointing to in order to make it.

  2. Sure, we all know figures don’t lie but liars figure, and we can all find figures to prove whatever we want to prove, and so on.

    Such a debate diverts attention from what is most important: the principles that

    The labor of a person is sacred – and not to be taxed by any authority. Note the Constitution before corruption by the greed of the Sixteenth Amendment. The Founders did many things very right and this was one of them! Focus should always be on stewardship and taxing of consumption, never on production.

    Ours is a land of equal opportunity, not a guarantee of equal results. All should be allowed and encouraged to make the most of their abilities and reap whatever rewards they can from them – within the bounds of legal limits, Biblical and civil.
    I dislike the distorted values that has a guy with an over-active pituitary gland get paid millions for throwing a ball through a hoop while the guy teaching my child algebra or history is paid a fraction of that – but I love the idea behind the nation that provides them with the freedom to choose the contribution they will make and be rewarded by the free choice of the recipient of that contribution – absent government interference. That is how the USA was founded and what I fought for. Income inequality is a very good thing indeed! – and what draws some immigrants to risk their lives to come here. Unfortunately, others come here to live better off the productive labor of others – along side those who are already here getting away with this crime.

    Furthermore, as originally designed, our nation has provided more wealth to more people than any other system the world has seen. That design is based on Biblical principles that are as immutable as they are rewarding. The vast majority of those in the US labeled ‘in poverty’ simply fall below an arbitrary politician-chosen line. By the standards of the world as a whole, there is virtually no one in the US in ‘poverty’.

    Income ‘distribution’ and all the euphemisms for government denying people the freedom to pursue happiness their own way [without hurting others' right to do the same thing] is the wrong focus. The important question should always be, “How can we increase freedom to give everyone more opportunity to increase the rewards most important to them, within Biblical and civil legal limits?”

    There is much more to say, and it has been stated best by those who put their lives, fortunes and sacred honor on the line. When was the last time you did that?

    Best Regards
    Bob

  3. Looking at the 2010 CPS* used for this analysis, reveals that the top income category is top coded. It only groups those over 100k. This suggests that it fails to measure changes in income equality talking place for those earning over 100k. Previous work on income inequality suggest that much of it is driven by incomes at the top end. Usually in the top 5% (or even 1%). Thus, it should not be surprising that this gini measure shows little change in inequality.

    But this entire exercise fails to capture the dynamic nature of income. The conversation should focus on whether individuals or households experience income mobility. While the focus should be on absolute income mobility, such as shown here (see page 4, Figure 3): http://www.brookings.edu/~/media/Files/rc/papers/2007/11_generations_isaacs/11_generations_isaacs.pdf. We should also recognize relative mobility such as those present here (Page 22, Table A5): http://www.treasury.gov/resource-center/tax-policy/Documents/incomemobilitystudy03-08revise.pdf

    Sean

    *Source: http://www.census.gov/hhes/www/cpstables/032011/perinc/new01_001.htm and the code book: http://www.census.gov/apsd/techdoc/cps/cpsmar11.pdf (See page 94)

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