Income inequality in the United States

Income inequality in the United States is the extent to which income, most commonly measured by household or individual, is distributed in an uneven manner. While there seems to be consensus among social scientists that some degree of income inequality is needed, the extent of income inequality and its implications on society continue to be a subject of great debate, as they have been for over a century.cite book | last = Porty | first = Richard | authorlink = | coauthors = | year = 1998 | title = Achieving Our Country: Leftist Thought in Twentieth-Century America | publisher = Harvard Press | location = Cambridge, MA | id = 0-674-00312-8] The majority of social scientists believe that income inequality currently poses a problem for American society with Alan Greenspan stating it to be a "very disturbing trend."cite web|url=http://www.tompaine.com/articles/2005/11/07/alan_greenspan_egalitarian.php|title=Pizzigati, S. (November 7, 2005). Alan Greenspan, Egalitarian?. "TomPaine.com".|accessdate=2007-06-20] cite web|url=http://www.federalreserve.gov/boarddocs/Speeches/1998/19980828.htm|title=Greenspan, A. (August 28, 1998). Remarks by Chairman Alan Greenspan. "The Federal Reserve Board.|accessdate=2007-06-20] Meanwhile, other, mostly conservative social scientists argue that income inequality with contemporary trends persisting is not a cause for concern and that current measures used to determine income inequality are not precise enough to produce accurate readings.cite web|url=http://www.cato.org/pubs/pas/pa586.pdf|title=Reynolds, A. (January 8, 2007). Has U.S. Income Inequality Really Increased?. "Cato Institute".|accessdate=2007-06-20] A 2004 poll of 1,000 economists showed that the majority of economists favor "redistribution."cite web|url=http://springerlink.metapress.com/content/w4q363786573275h/|title=Klein, D. B. & Stern, C. (December 6, 2004) Economists' policy views and voting. "Public Choice Journal".|accessdate=2007-07-02] A study by the Southern Economic Journal found that "71 percent of American economists believe the distribution of income in the US should be more equal, and 81 percent feel that the redistribution of income is a legitimate role for government."cite web|url=http://www.mises.org/story/2318|title=Klein, G. P. (November 15, 2006). Why Intellectuals Still Support Socialism. "Ludwig Von Mieses Institute".|accessdate=2007-08-21] Data from the United States Department of Commerce and Internal Revenue Service indicate that income inequality has been increasing since the 1970s,cite web|url=http://www.census.gov/hhes/www/income/histinc/ie6.html|title=US Census Bureau. (2001). Historical Income Tables - Income Equality.|accessdate=2007-06-20] cite web|url=http://www.census.gov/prod/1/pop/p60-191.pdf|title=Weinberg, D. H. (June 1996). A Brief Look At Postwar U.S. Income Inequality. "US Census Bureau".|accessdate=2007-06-20] cite web|url=http://www.brookings.edu/views/papers/burtless/20070111.htm|title=Burtless, G. (January 11, 2007). Has U.S. Income Inequality Really Increased?. "The Brookings Institute".|accessdate=2007-06-20] cite web|url=http://www.nytimes.com/2007/03/29/business/29tax.html?ex=1332820800&en=fb472e72466c34c8&ei=5088&partner=rssnyt&emc=rss|title=Johnston, D. (March 29, 2007). Income Gap Is Widening, Data Shows. "The New York Times"|accessdate=2007-06-20] cite web|url=http://www.cbpp.org/10-17-05inc.htm|title=Shaprio, E. (October 17, 2005). New IRS Data Show Income Inequality Is Again of The Rise. "Center on Budget and Policy Priorities|accessdate=2007-06-20] whereas it had been declining during the mid 20^th century.cite book | last = Gilbert | first = Dennis | authorlink = Dennis Gilbert | coauthors = | year = 2002 | title = American Class Structure in an Age of Growing Inequality | publisher = Wadsworth | location = | id = ] cite book | last = Beeghley | first = Leonard | authorlink = Leonard Beeghley | coauthors = | year = 2004 | title = "The Structure of Social Stratification in the United States | publisher = Pearson, Allyn & Bacpn | location = Boston, MD | id = ] As of 2006, the United States had one of the highest levels of income inequality, as measured through the Gini index, among high income countries, comparable to that of some middle income countries such as Russia or Turkey,cite web|url=https://www.cia.gov/library/publications/the-world-factbook/fields/2172.html|title=CIA. (June 14, 2007). Field Listing - Distribution of family income - Gini index. "Factbook"|accessdate=2007-06-20] being one of only few developed countries where inequality has increased since 1980.Weeks, J. (2007). Inequality Trends in Some Developed OECD countries. In J. K. S. & J. Baudot (Ed.), "Flat World, Big Gaps" (159-174). New York: ZED Books (published in association with the United Nations).]

cquote|As I've often said... this [increasing income inequality] is not the type of thing which a democratic society—a capitalist democratic society—can really accept without addressing. - Alan Greenspan, June 2005

In the early half of the 20th century, both the border closure movement and high school movement taking place in the United States shifted out the supply of skilled work. As a result, the country experienced falling inequality due to falling wages of skilled workers relative to unskilled workers. Despite a decrease in inequality during the 1940s, 50s and 60s, inequality has been increasing since. While income increased among all demographics,cite web|url=http://www.princeton.edu/~bartels/income.pdf|title=Bartles, L. M. (February, 2004). Partisan Politics and the U.S. Income Distribution. Woodrow Wilson School of Public and International Affairs|accessdate=2007-06-20] the upper-most earners saw substantially larger increases.cite web|url=http://www.commondreams.org/headlines05/0605-01.htm|title=Johnston, D. (June 5, 2005). Richest Are Leaving Even the Richest Far Behind. "The New York Times"|accessdate=2007-06-20] According to economist Janet Yellen "the growth [in real income] was heavily concentrated at the very tip of the top, that is, the top 1 percent."cite web|url=http://www.frbsf.org/news/speeches/2006/1106.html|title=Yellen, J. L. (November 6, 2006). Speech to the Center for the Study of Democracy at the University of California, Irvine. "Federal Reserve Bank of San Francisco".|accessdate=2007-06-20] A 2006 analysis of IRS income data by economists Emmanuel Saez at the University of California, Berkeley and Thomas Piketty at the Paris School of Economics showed that the share of income held by the top 1% was as large in 2005 as in 1928. The data revealed that reported income increased by 9% in 2005, with the mean for the top 1% increasing by 14% and that for the bottom 90% dropping slightly by 0.6%. Between 1979 and 2005, the mean after-tax income for the top 1% increased by 176%, compared to an increased of 69% for the top quintile overall, 20% for the fourth quintile, 21% for the middle quintile, 17% for the second quintile and 6% for the bottom quintile.cite web|url=http://www.cbpp.org/1-23-07inc.htm|title=Aron-Dine, A. & Sherman, A. (January 23, 2007). New CBO Data Show Income Inequality Continues to Widen: After-tax-income for Top 1 Percent Rose by $146,000 in 2004.|accessdate=2007-11-24] For the same time span the aggregate share of after-tax income held by the top percentile increased from 7.5% to 14%.cite web|url=http://www.cbpp.org/1-23-07inc.htm|title=Aron-Dine, A. & Sherman, A. (January 23, 2007). New CBO Data Show Income Inequality Continues to Widen: After-tax-income for Top 1 Percent Rose by $146,000 in 2004.|accessdate=2008-01-17] The diminishing political clout of labor unions, resulting from declining union membership rates, and less government redistribution as well as decreased expenditure on social services are commonly cited as the main causes of this trend. Economists Timothy Smeeding summed up the current trend of rising inequality on the pages of the "Social Science Quarterly":Smeeding, T. (2005). Public policy, economic inequality, and poverty: The United States in comparative perspective. "Social Science Quarterly, 86", 956-983.]

cquote
Americans have the highest income inequality in the rich world and over the past 20–30 years Americans have also experienced the greatest increase in income inequality among rich nations. The more detailed the data we can use to observe this change, the more skewed the change appears to be... the majority of large gains are indeed at the top of the distribution.

While eduation and increased demand for skilled labor is often cited as a cause of increased inequality,cite web|url=https://www.cia.gov/library/publications/the-world-factbook/geos/us.html#Econ|title=CIA. (June 14, 2007). United States: Economy. World Factbook.|accessdate=2007-06-20] many social scientists, such as economists Paul Krugman and Timothy Smeeding and political scientist Larry Bartels, point to public policy as the main cause of inequality. They point out that education cannot be the cause of the widening gap between the top 1% and everyone else, including well-educated professionals, and that the U.S. is unique in having experienced such a rise in inequality - a trend that, if caused by education, would have manifested itself in other developed nations.Bartels, L. M. (2008). "Unequal democracy: The political economy of the new gilded age". Princeton, NJ: Princeton University Press.] Krugman, P. (2007). "The concience of a liberal". New York: W. W. Norton.] While expertise, productiveness and work experience, inheritance, gender, and race had a strong influence on personal incomecite web|url=http://www.census.gov/prod/2004pubs/p20-550.pdf|title=Stoops, N. (June, 2004). Educational Attainment in the United States: 2003. "US Census Bureau".|accessdate=2007-06-21] cite web|url=http://pubdb3.census.gov/macro/032006/hhinc/new01_001.htm|title=US Census Bureau. (2006). Selected Characteristics of Households, by Total Money Income in 2005.|accessdate=2007-06-21] , household income was largely affected by the number of income earners, contributing to inequality between households based on the number of earners in them. Yet, other causes for income inequality, especially some of those behind its recent rise, remain unknown.

Household income

Inflation adjusted income data from the Census Bureau shows that household income has increased substantially for all demographics, with larger gains experienced by those with higher incomes. The emergence of dual-earner households has had a substantial impact on increasing household income, especially among households in the upper 20%. Along with the entrance of women into the labor force, the discrepancy between those households with one and those with multiple earners was amplified significantly. As of 2005, 42% of all U.S. households and 76% of those in the top quintile had two or more income earners.cite web|url=http://pubdb3.census.gov/macro/032006/hhinc/new05_000.htm|title=US Census Bureau. (2006). Household income quintiles and top 5%.|accessdate=2007-06-20] Income rose considerably faster in the higher regions of the household income strata. Between 1967 income increase experienced for the 95^th percentile, the lower threshold for the upper 5%, was 555.73% as large as the increase in median income, which in turn was 150.63% as large as the increase in income for the 20^th percentile. While the percentage of household with two or more income earners varied greatly across these three demographics, it is nearly identical for the 80^th and 95^th percentile. In 2003 a household in the 95^th percentile earned 77.2% more than a household in the 80^th percentile, compared to 60.5% in 1967, a 27.6% increase in the earnings increase discrepancy between the two groups. Overall the income of the 95^th percentile grew 15.2% faster than that of the 80^th, 146.8% faster than that of the median and 159.9% faster than that of the 20^th percentile.

Gross annual household income does not, however, always accurately reflect standard of living or socio-economic status, as it does not consider household size.cite web|url=http://www.blackwell-synergy.com/doi/abs/10.1111/j.1475-4991.1980.tb00175.x|title=Datta, B., & Meerman, J. (December 18, 1980). Household Income or Household Income Per Capita in Welfare Comparisons. "Review of Income and Wealth" 26 (4), 401–418.|accessdate=2007-06-20] Therefore, a large household in the upper quintile may have a lower standard of living than a small household in the fourth quintile. Similarly an upper middle class household with one income earners may have a lower gross annual household income than a lower middle class household with two income earners. As households in the upper quintile tend to be larger than households in lower quintiles, differences in household income may be larger than differences in standard of living. A recent analysis of income quintile data revealed that the aggregate share of income held by the upper quintile decreases by 20.3% when figures are adjusted to reflect household size.cite web|url=http://www.heritage.org/Research/Taxes/bg1791.cfm|title=Rector, R., & Herderman Jr., R. (August 24, 2004). Two Americas, One Rich, One Poor? Understanding Income Inequality In the United States. "Heritage Foundation".|accessdate=2007-06-20] It should thereby be noted that since 1967, the mean household size in the US has decreased 20.8%,cite web|url=http://www.census.gov/statab/hist/HS-12.pdf|title=US Census Bureau. (2002). Household by Type and Size: 1900 to 2002-Con.|accessdate=2007-06-20] while income disparities have increased. In 2003, the upper 20% household, who were home to roughly 25% of persons, earned 49.7% of all income before and 39.6% of income, after size adjustments. Conservatives commonly focused on the flaws of household income as a measure for standard of living in order to refute claims that income inequality is growing, becoming excessive or posing a problem for society. Liberals maintain that all measures have certain flaws but seem to undoubtedly indicate a significant increase in income inequality

SOURCE: US Census Bureau, 2004/06

While the returns to education increased considerably in the United States since the 1980s, it has not increased as much in many European countries such as Germany, France or the United Kingdom (Freeman, Richard B. and Lawrence F. Katz, editors Differences and Changes in Wage Structures. National Bureau of Economic Research. Comparative Labor Markets Series. The University of Chicago Press, 1995). The reasons for this discrepancy in inequality trends between Europe and the United States is still the subject of much debate but recent work suggests that tight regulations of labor markets in Europe could have prevented the returns to education from rising there as much as in the United States, but at the expense of creating unemployment (Fernández-Kranz, Daniel, “Why has wage inequality increased more in the United States than in Europe: an empirical investigation of the demand and supply of skill,” Applied Economics, Vol. 38, April 2006).

Race and gender disparities

Income levels remain considerably lower for females than for men with certain racial demographics having median income levels considerably below the national median.cite web|url=http://pubdb3.census.gov/macro/032006/perinc/new04_001.htm|title=US Census Bureau. (2006). People 18 Years Old and Over, by Total Money Earnings in 2005, Age, Race, Hispanic Origin, and Sex.|accessdate=2007-06-22] Despite, considerable progress in pursuing gender and racial equality, some social scientists attribute these discrepancies in income to continued discrimination.cite book|last = Schaeffer|first=Richard|authorlink=|coauhtors|year=2005|title=Racial and Ethnic Groups|publisher=Prentice Hall|location=New York, NY|id=013192897X] Others argue that the majority of the wage gap is due to women's choices and preferences. Women are more likely to consider factors other than salary when looking for employment. On average, women are less willing to travel or relocate, take more hours off and work fewer hours, and choose college majors that lead to lower paying jobs. Women are also more likely to work for governments or non-profits, that pay less than the private sector. [ [http://www.washingtonpost.com/wp-dyn/content/article/2007/04/02/AR2007040201262.html Carrie Lukas - A Bargain At 77 Cents To a Dollar - washingtonpost.com ] ] [ [http://reason.com/news/show/119920.html The Truth About the Pay G
] ] According to this perspective certain ethnic minorities and women receive fewer promotions and opportunities for occupation and economic advancement than others. In the case of women this concept is referred to as the glass ceiling keeping women from climbing the occupational ladder. In terms of race, studies have shown that African Americans are less likely to be hired than European-Americans with the same qualifications.cite book|last=Hine|first=Darlene|authorlink=|coauthors=William C. Hine, Stanley Harrold|year=2006|title=The African American Odyssey|publisher=Pearson|location=Boston, MA|id=0-12-182217-3] The continued prevalence of traditional gender roles and ethnic stereotypes may partially account for current levels of discrimination. In 2005, median income levels were highest among Asian and White males and lowest among females of all races, especially those identifying as African American or Hispanic. Despite closing gender and racial gaps considerably discrepancies remain among racial and gender demographics, even at the same level of educational attainment.cite web|url=http://pubdb3.census.gov/macro/032006/perinc/new02_001.htm|title=People 18 Years Old and Over, by Total Money Income in 2005, Work Experience in 2005, Age, Race, Hispanic Origin, and Sex.|accessdate=2007-06-22]

Since 1953 the income gap between male and female workers has decreased considerably but remains relatively large. Women currently earn significantly more Associate's, Bachelor's, and Master's degrees than men and almost as many Doctorates. [ [http://nces.ed.gov/programs/digest/d07/tables/dt07_178.asp Historical summary of faculty, students, degrees, and finances in degree-granting institutions: Selected years, 1869-70 through 2005-06 ] ] Women are projected to have passed men in Doctorates earned in 2006-2007, and to earn nearly two thirds of Associate's, Bachelor's, and Master's degrees by 2016. [ [http://nces.ed.gov/programs/digest/d07/tables/dt07_258.asp Degrees conferred by degree-granting institutions, by level of degree and sex of student: Selected years, 1869-70 through 2016-17 ] ] Despite this, someWho|date=July 2008 still argue that male workers still hold higher educational attainment, as the success of women in academia is a relatively new phenomenon. Though it is important to note that income inequality between sexes remained stark at all levels of educational attainment. Between 1953 and 2005 median earnings as well as educational attainment increased, at a far greater pace for women than for men. Median income for male earners increased by 36.2% versus 157.2% among female earners. This mean that the median income of women rose 334.5% as fast as that of men. The extent by which men out-earned women reduced by 61.2%, indicating increased gender equality. Today male workers earn roughly 68.36% more than their female counterparts compared to 176.25% in 1953. Furthermore income has increased more or less continuously for women, while the median earning for men have shown some fluctuation and stagnation since the early 1970s. The median income of men in 2005 was 2% higher than in 1973 compared to a 74.6% increase for female earners. Racial differences remained stark as well with the highest earning sex-gender demographic of workers aged 25 or older, Asian males (who were roughly tied with white males, earning more than twice, 109.7%, as much as the lowest earning demographic, Hispanic females.cite web|url=http://pubdb3.census.gov/macro/032006/perinc/new03_133.htm|title=US Census Bureau. (2006). Income distribution among Asian males, age 25+ according to educational attainment.|accessdate=2007-06-22] cite web|url=http://pubdb3.census.gov/macro/032006/perinc/new03_261.htm|title=US Census Bureau. (2006). Income distribution among Hispanic females, age 25+ according to educational attainment.|accessdate=2007-06-22] As mentioned above, inequality between races and gender persisted at similar education levels. In 2005, Asian men, age 25+, with a Bachelor's degree or higher earned 203.8% more than Hispanic females (age 25+) with the same educational attainment.cite web|url=http://pubdb3.census.gov/macro/032006/perinc/new03_133.htm|title=US Census Bureau. (2006). Personal income distribution among Asian males, age 25+ according to educational attainment.|accessdate=2007-06-22] Racial differences were overall more pronounced among male than among female income earners.

An April 15, 2005 article titled "Gender Wage Gap Is Feminist Fiction" from the Independent Women's Forum states, the wage disparities between men and women are largely the result of different occupations in which women and men find themselves. Men tend to work in higher earning occupations and women in lower earning occupations. Thus, if employed in the same job, with same education and same experience women earn 98 cents for evey dollar a man earns. [ [http://www.iwf.org/campus/show/18948.html Gender Wage Gap Is Feminist Fiction] Independent Women's Forum,April 15, 2005]

SOURCE: US Census Bureau, 2006

Income at a glance

ee also

*List of countries by income equality
*Gini coefficient
*Economic inequality
*Economic mobility
*Economy of the United States
*Income in the United States
*Income inequality
*Social class in the United States
*Social justice
*Wealth inequality in the United States

References