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Overview of Trends of Economic Inequality in the USA
|Has the dispersion of earnings been increasing in recent decades?||Yes, the top decile of earnings has risen from 150 per cent of median in 1950 to 244 per cent in 2012.|
|Has overall inequality increased in recent years?||Yes, the Gini coefficient for gross income now 7 percentage points higher than in 1980.|
|Have there been periods when overall inequality fell for a sustained period?||Yes, from 1929 to 1945.|
|Has poverty been falling or rising in recent decades?||Official poverty measure fell from 1948 to 1970s, since then cyclical variation about constant level.|
|Has there been a U-pattern for top income shares over time?||Yes, top gross income shares fell from 1928 to the 1970s; since mid-1970s have more than doubled.|
|Has the distribution of wealth followed the same pattern as income?||Top wealth shares generally decreased till 1982 but have not followed the upward trend in top incomes.|
|Additional noteworthy features||Earnings dispersion widened during the Period from 1950 to 1970 but overall income inequality did not increase.|
Sources and References
Sources for the historical data series:
Overall inequality: Gini coefficient, series 1, for gross income of income recipients based on the NBER/Brookings synthetic estimates, calculated from the tabulations in Mitchell et al (1921, Table 25) and Leven, Moulton and Warburton (1934, Tables 27 and 29, excluding capital gains); Series 2 is the BEA synthetic series for gross family incomes from Brandolini (2002, T able A1), who calculated the Gini coefficients from the original tabulations (NB the figure for 1929 is 50.7 but is depicted as 50.0); Series 3 is the Gini coefficient for gross equivalised household income from the U.S. Bureau of the Census, Income, Poverty, and Health Insurance Coverage in the United States: 2012, (Table A-3, Selected measures of equivalence-adjusted income dispersion), where we have assumed that half of the recorded change between 1992 and 1993 was due to the change in methods (and therefore added 1.15 percentage points to the values from 1992 back to 1967), this series is linked backwards at 1967 to the series from 1944 given by Budd (1970, Table 6).
Top income shares: The top income shares (excluding capital gains) are based on the work of Piketty and Saez (2003), and are taken from the website of Emmanuel Saez.
Poverty: The proportion of the population below the official poverty line before 1959 from Fisher (1986) and from 1959 from the U.S. Bureau of the Census website, Historical Poverty Tables, Table 2 and Table B1 from the U.S. Bureau of the Census, Income, Poverty, and Health Insurance Coverage in the United States: 2012; Proportion living in households with disposable income below 50 per cent of the median from Meyer and Sullivan (2010, Appendix Table 7).
Individual earnings: Series 1 is based on the Census of Population data and is from Goldin and Margo (1992, Table 2); Series 2 is based on the Current Population Survey (CPS) from the OECD iLibrary, linked at 1973 to the estimates of Karoly (1992, Table 2B.2), and at 1963 to the estimates made in Atkinson (2008, Table T.10) from the CPS tabulations.
Wealth: The top wealth shares based on estate data are from Kopczuk and Saez (2004, Table B1); the household wealth shares from the Survey of Consumer Finances are from Kennickell (2009, Table 4, and 2011, Table 5.
- Atkinson, A B, 2008, The changing distribution of earnings in OECD countries, Oxford University Press, Oxford.
- Brandolini, A, 2002, “A bird’s eye view of long-run changes in income inequality”, Bank of Italy Research Department, Rome.
- Budd, E C, 1970, “Postwar changes in the size distribution of income in the U.S.”, American Economic Review, Papers and Proceedings, vol 60: 247-260.
- Fisher, G, 1986, “Estimates of the poverty population under the current official definition for years before 1959”, mimeograph, Office of the Assistant Secretary for Planning and Evaluation, U.S. Department of Health and Human Services.
- Goldin, C and Margo, R A, 1992, “The Great Compression: The wage structure of the United States at mid-century”, Quarterly Journal of Economics, vol 107: 1-34.
- Goldsmith, S F, 1958, “The Relation of Census Income Distribution Statistics to Other Income Data”, in An Appraisal of the 1950 Census Income Data, Studies in Income and Wealth, vol 23: 65-107, Princeton, Princeton University Press.
- Karoly, L, 1992, The trend in inequality among families, individuals, and workers in the United States: A twenty-five-year perspective, Rand, Santa Monica.
- Kennickell, A B, 2009, “Ponds and streams: Wealth and income in the U.S., 1989 to 2007”, Finance and Economics Discussion Series, Federal Reserve Board, Washington, D.C.
- Kennickell, A B, 2011, “Tossed and turned: Wealth dynamics of U.S. households 2007-2009”, Finance and Economics Discussion Series, Federal Reserve Board, Washington, D.C.
- Kopczuk, W and Saez, E, 2004, “Top wealth shares in the US, 1916-2000: Evidence from the Estate Tax returns”, National Tax Journal, vol 57: 445-487, longer version in NBER Working Paper 10399.
- Leven, M, Moulton, H G and Warburton, C, 1934, America’s capacity to consume, Brookings Institution, Washington, D.C.
- Meyer, B D and Sullivan, J X, 2010, “Five decades of consumption and income poverty”, discussion paper.
- Mitchell, W C, King, W I, Macaulay, F R and Knauth, O W, 1921, Income in the United States: Its amount and distribution 1909-1919, Harcourt, Brace, New York.
- Piketty, T and Saez, E, 2003, “Income inequality in the United States, 1913-1998”, Quarterly Journal of Economics, vol 118: 1-39.