Income Inequality in America

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For a better understanding of this article and to get a better understanding of the numbers listed, refer to the graph through the link at the bottom of this page. Here you will find all of the graphs that illustrate the numbers listed below.

Income Inequality

Income inequality refers to the extent to which income is distributed in an uneven manner among a population. In the United States, income inequality, or the gap between the rich and everyone else, has been growing markedly for some 30 years.

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Source: U.S. Census Bureau, Historical Income Tables: Families, Table F-3 (for income changes) and Table F-1 (for income ranges in 2009 dollars)[1]

Contents

Household and Family Income

Income includes the revenue streams from wages, salaries, interest on a savings account, dividends from shares of stock, rent, and profits from selling something for more than you paid for it. The Gini Index measures the degree of inequality in the distribution of family income in a country. It is calculated by using the Lorenz curve, in which total family income is plotted against the number of families arranged from the poorest to the richest. The Gini Index of the United States, as of 2007, reported in at .45. [2]

The median U.S. household income in 2009 totaled $49,777, according to Census data. Half of American households had income greater than this figure, half less. The current recession has hit incomes hard across the board. Median household income declined 4.2% between 2007 and 2009. Adjusting for inflation, incomes are at their lowest point since 1997.

Between the end of World War II and the late 1970s, incomes in the United States were becoming more equal. In other words, incomes at the bottom were rising faster than those at the top. Since the late 1970s, this trend has reversed.

Data from tax returns show that the top 1% of households received 8.9% of all pre-tax income in 1976. In 2008, the top 1% share had more than doubled to 21.0%.

This level of income inequality, research shows, endangers our society, on a variety of fronts.

In 2007, the top 1% share of national income peaked at 23.5%. The only other year since 1913 that the wealthy had claimed such a large share of national income: 1928, when the top 1% share was 23.9%. The following year, the stock market crashed, and the Great Depression began. After peaking again in 2007, the U.S. stock market crashed in 2008, leading to what some are now calling the “Great Recession.”

Between 1979 and 2009, the top 5 percent of American families saw their real incomes increase 72.7 percent, according to Census data. Over the same period, the lowest-income fifth saw a decrease in real income of 7.4 percent. This contrasts sharply with the 1947-79 period, when all income groups saw similar income gains, with the lowest income group actually seeing the largest gains. [3]

Gini by state map.jpg [4]

CEO Pay

After adjusting for inflation, CEO pay in 2009 more than doubled the CEO pay average for the decade of the 1990s, more than quadrupled the CEO pay average for the 1980s, and ran approximately eight times the CEO average for all the decades of the mid-20th century [5].

In 2009, CEOs of major U.S. corporations averaged 263 times the average compensation of American workers (Institute for Policy Studies, Executive Excess 2010). [6]

CEOs who cut jobs the most cashed in the greatest. In 2009, the CEOs who slashed their payrolls the deepest took home 42 percent more compensation than the year’s chief executive pay average for S&P 500 companies (Institute for Policy Studies, Executive Excess 2010).

Wages

After rising steadily during the three decades following World War II, wages have stagnated since the early 1970s. Between 1947 and 1972, the average hourly wage, adjusted for inflation, rose 76 percent. Since 1972, by contrast, the average hourly wage has risen only 4%.[7]

The Great Divergence

The Great Divergence is a period of rapid income inequality growth in the late 1970s, when wages stagnated and inflation increased. The usual reasons, gender and immigration, could not be credited for the increasing income inequality of this period, instead a majority of the population attributed the growing incomes of the upper echelon to "their intelligence and skill." In a sense, this is true, but only because of education levels. Education was seen as a more important skill for the general workforce, for the most part Americans got dumber compared to the rest of the world. The upper tier of workers began earning more due to the earnings attached to their degrees[8].

2007 U.S. Income Distribution

Distribution1.jpg [9]

Wage Percent of National Income 1980-2011

US Wage Share 1980 2011.jpg[10]

Uneven Prosperity

Uneven Prosperity.gif

References

  1. "Historical Income Tables - Families - U.S Census Bureau." Census Bureau Homepage. N.p., n.d. Web. 16 Apr. 2012. <http://www.census.gov/hhes/www/income/data/historical/families/index.html>.
  2. https://www.cia.gov/library/publications/the-world-factbook/rankorder/2172rank.html
  3. http://inequality.org/income-inequality/
  4. http://mapscroll.blogspot.com/2009/04/is-us-becoming-third-world-country.html
  5. Anderson, Sarah. "Executive Excess 2010: CEO Pay and the Great Recession - IPS." Ideas into Action for Peace, Justice, and the Environment - Institute for Policy Studies. N.p., n.d. Web. 16 Apr. 2012. <http://www.ips-dc.org/reports/executive_excess_2010>.
  6. http://inequality.org/income-inequality/
  7. http://inequality.org/income-inequality/
  8. http://www.slate.com/articles/news_and_politics/the_great_divergence/2010/09/the_united_states_of_inequality.html
  9. http://lowdownsplace.blogspot.com/
  10. http://bilbo.economicoutlook.net/blog/?p=16325
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