1. Trends in income and wealth inequality - Pew Research ...

Income inequality in the U.S has increased since 1980 and is greater than in peer countries Politics&PolicyInternationalAffairsImmigration&MigrationRace&EthnicityReligionGenerations&AgeGender&LGBTFamily&RelationshipsEconomy&WorkScienceInternet&TechnologyNewsHabits&MediaMethodologicalResearchFulltopiclist Asia&thePacificEurope&RussiaLatinAmericaMiddleEast&NorthAfricaNorthAmericaSub-SaharanAfricaMultipleRegions/Worldwide FeaturesFactSheetsVideosDataEssays Seeourresearchon:Abortion|Russia|Economy|COVID-19 HomeResearchTopicsEconomy&WorkIncome,Wealth&PovertyEconomicInequality Barely10yearspasttheendoftheGreatRecessionin2009,theU.S.economyisdoingwellonseveralfronts.Thelabormarketisonajob-creatingstreakthathasrungupmorethan110monthsstraightofemploymentgrowth,arecordforthepost-WorldWarIIera.TheunemploymentrateinNovember2019was3.5%,alevelnotseensincethe1960s.Gainsonthejobsfrontarealsoreflectedinhouseholdincomes,whichhavereboundedinrecentyears. Butnotalleconomicindicatorsappearpromising.Householdincomeshavegrownonlymodestlyinthiscentury,andhouseholdwealthhasnotreturnedtoitspre-recessionlevel.Economicinequality,whethermeasuredthroughthegapsinincomeorwealthbetweenricherandpoorerhouseholds,continuestowiden. Householdincomesaregrowingagainafteralengthyperiodofstagnation Withperiodicinterruptionsduetobusinesscyclepeaksandtroughs,theincomesofAmericanhouseholdsoverallhavetrendedupsince1970.In2018,themedianincomeofU.S.householdsstoodat$74,600.5Thiswas49%higherthanitslevelin1970,whenthemedianincomewas$50,200.6(Incomesareexpressedin2018dollars.) Buttheoveralltrendmaskstwodistinctepisodesintheevolutionofhouseholdincomes(thefirstlastingfrom1970to2000andthesecondfrom2000to2018)andinhowthegainsweredistributed. Mostoftheincreaseinhouseholdincomewasachievedintheperiodfrom1970to2000.Inthesethreedecades,themedianincomeincreasedby41%,to$70,800,atanannualaveragerateof1.2%.From2000to2018,thegrowthinhouseholdincomeslowedtoanannualaveragerateofonly0.3%.Iftherehadbeennosuchslowdownandincomeshadcontinuedtoincreaseinthiscenturyatthesamerateasfrom1970to2000,thecurrentmedianU.S.householdincomewouldbeabout$87,000,considerablyhigherthanitsactuallevelof$74,600. Theshortfallinhouseholdincomeisattributableinparttotworecessionssince2000.Thefirstrecession,lastingfromMarch2001toNovember2001,wasrelativelyshort-lived.7Yethouseholdincomeswereslowtorecoverfromthe2001recessionanditwasnotuntil2007thatthemedianincomewasrestoredtoaboutitslevelin2000. But2007alsomarkedtheonsetoftheGreatRecession,andthatdeliveredanotherblowtohouseholdincomes.Thistimeittookuntil2015forincomestoapproachtheirpre-recessionlevel.Indeed,themedianhouseholdincomein2015–$70,200–wasnohigherthanitslevelin2000,markinga15-yearperiodofstagnation,anepisodeofunprecedenteddurationinthepastfivedecades.8 MorerecenttrendsinhouseholdincomesuggestthattheeffectsoftheGreatRecessionmayfinallybeinthepast.From2015to2018,themedianU.S.householdincomeincreasedfrom$70,200to$74,600,atanannualaveragerateof2.1%.Thisissubstantiallygreaterthantheaveragerateofgrowthfrom1970to2000andmoreinlinewiththeeconomicexpansioninthe1980sandthedot-combubbleeraofthelate1990s. Whyeconomicinequalitymatters TheriseineconomicinequalityintheU.S.istiedtoseveralfactors.Theseinclude,innoparticularorder,technologicalchange,globalization,thedeclineofunionsandtheerodingvalueoftheminimumwage.Whateverthecauses,theuninterruptedincreaseininequalitysince1980hascausedconcernamongmembersofthepublic,researchers,policymakersandpoliticians. Onereasonfortheconcernisthatpeopleinthelowerrungsoftheeconomicladdermayexperiencediminishedeconomicopportunityandmobilityinthefaceofrisinginequality,aphenomenonreferredtoasTheGreatGatsbyCurve.Othershavehighlightedinequality’snegativeimpactonthepoliticalinfluenceofthedisadvantaged,ongeographicsegregationbyincome,andoneconomicgrowthitself.Themattermaynotbeentirelysettled,however,asanopposingviewpointsuggeststhatincomeinequalitydoesnotharmeconomicopportunity. Alternativeestimatesofeconomicinequality ThisreportpresentsestimatesofincomeinequalitybasedonhouseholdincomeasestimatedintheCurrentPopulationSurvey(CPS),asurveyofhouseholdsconductedbytheU.S.CensusBureauinpartnershipwiththeBureauofLaborStatistics.Theseestimatesrefertogross(pretax)incomeandencompassmostsourcesofincome.Akeyomissionisthevalueofin-kindservicesreceivedfromgovernmentsources.Becauseincometaxesareprogressiveandin-kindservicesalsoservetoboosttheeconomicwellbeingof(poorer)recipients,notaccountingforthesetwofactorscouldoverstatethetruegapinthefinancialresourcesofpoorerandricherhouseholds. TheCongressionalBudgetOffice(CBO)offersanalternativeestimateofincomeinequalitythataccountsforfederaltaxesandamorecomprehensivearrayofcashtransfersandin-kindservicesthanispossiblewithCurrentPopulationSurveydata.TheCBOfindsthattheGinicoefficientintheU.S.in2016rangedfrom0.595,beforeaccountingforanyformsoftaxesandtransfers,to0.423,afterafullaccountingoftaxesandtransfers.TheseestimatesbrackettheCensusBureau’sestimateof0.481fortheGinicoefficientin2016.Byeitherestimate,incomeinequalityintheU.S.isfoundtohaveincreasedbyabout20%from1980to2016(TheGinicoefficientrangesfrom0to1,orfromperfectequalitytocompleteinequality).Findingsfromotherresearchersshowthesamegeneralriseininequalityoverthisperiodregardlessofaccountingforin-kindtransfers. Yetanotheralternativeistofocusoninequalityinconsumption,whichimplicitlyaccountsforallformsandsourcesofincomes,taxesandtransfers.SomeestimatesbasedonconsumptionshowthatinequalityintheU.S.increasedbylessthanimpliedbyestimatesbasedonincome,butotherestimatessuggestthetrendsbasedonconsumptionandincomearesimilar.Empirically,consumptioncanbehardertomeasurethanincome. Upper-incomehouseholdshaveseenmorerapidgrowthinincomeinrecentdecades Thegrowthinincomeinrecentdecadeshastiltedtoupper-incomehouseholds.Atthesametime,theU.S.middleclass,whichoncecomprisedtheclearmajorityofAmericans,isshrinking.Thus,agreatershareofthenation’saggregateincomeisnowgoingtoupper-incomehouseholdsandthesharegoingtomiddle-andlower-incomehouseholdsisfalling.9 TheshareofAmericanadultswholiveinmiddle-incomehouseholdshasdecreasedfrom61%in1971to51%in2019.Thisdownsizinghasproceededslowlybutsurelysince1971,witheachdecadethereaftertypicallyendingwithasmallershareofadultslivinginmiddle-incomehouseholdsthanatthebeginningofthedecade. Thedeclineinthemiddle-classshareisnotatotalsignofregression.From1971to2019,theshareofadultsintheupper-incometierincreasedfrom14%to20%.Meanwhile,theshareinthelower-incometierincreasedfrom25%to29%.Onbalance,therewasmoremovementuptheincomeladderthandowntheincomeladder. Butmiddle-classincomeshavenotgrownattherateofupper-tierincomes.From1970to2018,themedianmiddle-classincomeincreasedfrom$58,100to$86,600,againof49%.10Thiswasconsiderablylessthanthe64%increaseforupper-incomehouseholds,whosemedianincomeincreasedfrom$126,100in1970to$207,400in2018.Householdsinthelower-incometierexperiencedagainof43%,from$20,000in1970to$28,700in2018.(Incomesareexpressedin2018dollars.) Moretepidgrowthintheincomeofmiddle-classhouseholdsandthereductionintheshareofhouseholdsinthemiddle-incometierledtoasteepfallintheshareofU.S.aggregateincomeheldbythemiddleclass.From1970to2018,theshareofaggregateincomegoingtomiddle-classhouseholdsfellfrom62%to43%.Overthesameperiod,theshareheldbyupper-incomehouseholdsincreasedfrom29%to48%.Theshareflowingtolower-incomehouseholdsincheddownfrom10%in1970to9%in2018. ThesetrendsinincomereflectthegrowthineconomicinequalityoverallintheU.S.inthedecadessince1980. Incomegrowthhasbeenmostrapidforthetop5%offamilies Evenamonghigher-incomefamilies,thegrowthinincomehasfavoredthoseatthetop.Since1980,incomeshaveincreasedfasterforthemostaffluentfamilies–thoseinthetop5%–thanforfamiliesintheincomestratabelowthem.ThisdisparityinoutcomesislesspronouncedinthewakeoftheGreatRecessionbutshowsnosignsofreversing. From1981to1990,thechangeinmeanfamilyincomerangedfromalossof0.1%annuallyforfamiliesinthelowestquintile(thebottom20%ofearners)toagainof2.1%annuallyforfamiliesinthehighestquintile(thetop20%).Thetop5%offamilies,whoarepartofthehighestquintile,faredevenbetter–theirincomeincreasedattherateof3.2%annuallyfrom1981to1990.Thus,the1980smarkedthebeginningofalongandsteadyriseinincomeinequality.   Asimilarpatternprevailedinthe1990s,withevensharpergrowthinincomeatthetop.From1991to2000,themeanincomeofthetop5%offamiliesgrewatanannualaveragerateof4.1%,comparedwith2.7%forfamiliesinthehighestquintileoverall,andabout1%orbarelymoreforotherfamilies. Theperiodfrom2001to2010isuniqueinthepost-WWIIera.Familiesinallstrataexperiencedalossinincomeinthisdecade,withthoseinthepoorerstrataexperiencingmorepronouncedlosses.Thepatterninincomegrowthfrom2011to2018ismorebalancedthanthepreviousthreedecades,withgainsmorebroadlysharedacrosspoorerandbetter-offfamilies.Nonetheless,incomegrowthremainstiltedtothetop,withfamiliesinthetop5%experiencinggreatergainsthanotherfamiliessince2011. ThewealthofAmericanfamiliesiscurrentlynohigherthanitsleveltwodecadesago Otherthanincome,thewealthofafamilyisakeyindicatorofitsfinancialsecurity.Wealth,ornetworth,isthevalueofassetsownedbyafamily,suchasahomeorasavingsaccount,minusoutstandingdebt,suchasamortgageorstudentloan.Accumulatedovertime,wealthisasourceofretirementincome,protectsagainstshort-termeconomicshocks,andprovidessecurityandsocialstatusforfuturegenerations. Theperiodfromthemid-1990stothemid-2000swasbeneficialforthewealthportfoliosofAmericanfamiliesoverall.Housingpricesmorethandoubledinthisperiod,andstockvaluestripled.11Asaresult,themediannetworthofAmericanfamiliesclimbedfrom$94,700in1995to$146,600in2007,againof55%.12(Figuresareexpressedin2018dollars.) Buttherunupinhousingpricesprovedtobeabubblethatburstin2006.Homepricesplungedstartingin2006,triggeringtheGreatRecessionin2007anddraggingstockpricesintoasteepfallaswell.Consequently,themediannetworthoffamiliesfellto$87,800by2013,alossof40%fromthepeakin2007.Asof2016,thelatestyearforwhichdataareavailable,thetypicalAmericanfamilyhadanetworthof$101,800,stilllessthanwhatitheldin1998. Thewealthdivideamongupper-incomefamiliesandmiddle-andlower-incomefamiliesissharpandrising Thewealthgapamongupper-incomefamiliesandmiddle-andlower-incomefamiliesissharperthantheincomegapandisgrowingmorerapidly. Theperiodfrom1983to2001wasrelativelyprosperousforfamiliesinallincometiers,butoneofrisinginequality.Themedianwealthofmiddle-incomefamiliesincreasedfrom$102,000in1983to$144,600in2001,againof42%.Thenetworthoflower-incomefamiliesincreasedfrom$12,3ooin1983to$20,600in2001,up67%.Evenso,thegainsforbothlower-andmiddle-incomefamilieswereoutdistancedbyupper-incomefamilies,whosemedianwealthincreasedby85%overthesameperiod,from$344,100in1983to$636,000in2001.(Figuresareexpressedin2018dollars.) Thewealthgapbetweenupper-incomeandlower-andmiddle-incomefamilieshasgrownwiderthiscentury.Upper-incomefamiliesweretheonlyincometierabletobuildontheirwealthfrom2001to2016,adding33%atthemedian.Ontheotherhand,middle-incomefamiliessawtheirmediannetworthshrinkby20%andlower-incomefamiliesexperiencedalossof45%.Asof2016,upper-incomefamilieshad7.4timesasmuchwealthasmiddle-incomefamiliesand75timesasmuchwealthaslower-incomefamilies.Theseratiosareupfrom3.4and28in1983,respectively. Thereasonforthisisthatmiddle-incomefamiliesaremoredependentonhomeequityasasourceofwealththanupper-incomefamilies,andtheburstingofthehousingbubblein2006hadmoreofanimpactontheirnetworth.Upper-incomefamilies,whoderivealargershareoftheirwealthfromfinancialmarketassetsandbusinessequity,wereinabetterpositiontobenefitfromarelativelyquickrecoveryinthestockmarketoncetherecessionended. Aswiththedistributionofaggregateincome,theshareofU.S.aggregatewealthheldbyupper-incomefamiliesisontherise.From1983to2016,theshareofaggregatewealthgoingtoupper-incomefamiliesincreasedfrom60%to79%.Meanwhile,theshareheldbymiddle-incomefamilieshasbeencutnearlyinhalf,fallingfrom32%to17%.Lower-incomefamilieshadonly4%ofaggregatewealthin2016,downfrom7%in1983. Therichestaregettingricherfaster TherichestfamiliesintheU.S.haveexperiencedgreatergainsinwealththanotherfamiliesinrecentdecades,atrendthatreinforcesthegrowingconcentrationoffinancialresourcesatthetop. Thetilttothetopwasmostacuteintheperiodfrom1998to2007.Inthatperiod,themediannetworthoftherichest5%ofU.S.familiesincreasedfrom$2.5millionto$4.6million,againof88%. Thiswasnearlydoublethe45%increaseinthewealthofthetop20%offamiliesoverall,agroupthatincludestherichest5%.Meanwhile,thenetworthoffamiliesinthesecondquintile,onetierabovethepoorest20%,increasedbyonly16%,from$27,700in1998to$32,100in2007.(Figuresareexpressedin2018dollars.) ThewealthiestfamiliesarealsotheonlyonestohaveexperiencedgainsinwealthintheyearsafterthestartoftheGreatRecessionin2007.From2007to2016,themediannetworthoftherichest20%increased13%,to$1.2million.Forthetop5%,itincreasedby4%,to$4.8million.Incontrast,thenetworthoffamiliesinlowertiersofwealthdecreasedbyatleast20%from2007to2016.Thegreatestloss–39%–wasexperiencedbythefamiliesinthesecondquintileofwealth,whosewealthfellfrom$32,100in2007to$19,500in2016. Asaresult,thewealthgapbetweenAmerica’srichestandpoorerfamiliesmorethandoubledfrom1989to2016.In1989,therichest5%offamilieshad114timesasmuchwealthasfamiliesinthesecondquintile,$2.3millioncomparedwith$20,300.By2016,thisratiohadincreasedto248,amuchsharperrisethanthewideninggapinincome.13 IncomeinequalityintheU.Shasincreasedsince1980andisgreaterthaninpeercountries Incomeinequalitymaybemeasuredinanumberofways,butnomatterthemeasure,economicinequalityintheU.S.isseentobeontherise. Onewidelyusedmeasure–the90/10ratio–takestheratiooftheincomeneededtorankamongthetop10%ofearnersintheU.S.(the90thpercentile)totheincomeatthethresholdofthebottom10%ofearners(the10thpercentile).In1980,the90/10ratiointheU.S.stoodat9.1,meaningthathouseholdsatthetophadincomesaboutninetimestheincomesofhouseholdsatthebottom.Theratioincreasedineverydecadesince1980,reaching12.6in2018,anincreaseof39%.14 NotonlyisincomeinequalityrisingintheU.S.,itishigherthaninotheradvancedeconomies.ComparisonsofincomeinequalityacrosscountriesareoftenbasedontheGinicoefficient,anothercommonlyusedmeasureofinequality.15Rangingfrom0to1,orfromperfectequalitytocompleteinequality,theGinicoefficientintheU.S.stoodat0.434in2017,accordingtotheOrganizationforEconomicCooperationandDevelopment(OECD).16ThiswashigherthaninanyotheroftheG-7countries,inwhichtheGinirangedfrom0.326inFranceto0.392intheUK,andinchingclosertothelevelofinequalityobservedinIndia(0.495).Moreglobally,theGinicoefficientofinequalityrangesfromlowsofabout0.25inEasternEuropeancountriestohighsintherangeof0.5to0.6incountriesinsouthernAfrica,accordingtoWorldBankestimates. Next:2.Viewsofeconomicinequality ←PrevPage NextPage→ Themedianincomesplitstheincomedistributionintotwohalves–halfthehouseholdsearnlessthanthemedianandhalfthehouseholdsearnmore.Incomesareadjustedforhouseholdsizeandscaledtorepresentahouseholdsizeofthree.Seemethodologyfordetails.↩Percentagechangesareestimated,andothercalculationsaremade,beforenumbersarerounded.↩TherecessiondatesareasdesignatedbytheNationalBureauofEconomicResearch.↩Itislikelythathouseholdincomesdidnotreturntotheir2000leveltill2016orlater.AredesignofincomequestionsbytheCensusBureauin2014isestimatedtohavegivenaboostofabout3%tomedianhouseholdincomeintheU.S.atthetimeoftheredesign.↩Middle-income”Americansareadultswhoseannualhouseholdincomeistwo-thirdstodoublethenationalmedian,afterincomeshavebeenadjustedforhouseholdsize.Lower-incomehouseholdshaveincomeslessthan67%ofthemedianandupper-incomehouseholdshaveincomesthataremorethandoublethemedian.Seemethodologyfordetails.PreviousPewResearchCenterreportshaveexaminedthestateoftheAmericanmiddleclassingreaterdetail,includingtrendswithinU.S.metropolitanareas.↩ThedatasourcefortheseestimatesistheCurrentPopulationSurvey,AnnualSocialandEconomicSupplementfor1971to2019.Inthesurvey,respondentsprovidehouseholdincomedataforthepreviouscalendaryear.Thus,incomedatainthissectionrefertothe1970-2018periodandthecountsofpeoplefromthesamesurveyrefertothe1971-2019period.↩TheS&P/Case-ShillerU.S.NationalHomePriceIndexincreasedfrom80inJanuary1995to185inJune2006(January2000=100).Itfellto134inFebruary2012andclimbedthereafter,reaching212inAugust2019.AtthestartoftheGreatRecessioninDecember2007,theS&P500indexstoodatabout1,500,threetimesitslevelofabout500in1995.Afterthepeakin2007,theS&P500fellbelow1,000in2009.AsofNovember2019,theindexhadreachedalevelofabout3,000.(S&P500historicalvaluesdownloadedfromYahoo!onNov.21,2019.)↩EstimatesofwealtharefromtheSurveyofConsumerFinances(SCF).TheSCFisconductedtrienniallybytheFederalReserveBoardofGovernors.Itwasfirstfieldedin1983andthelatestsurveyforwhichdataareavailablewasin2016.↩Itisnotpossibletocomputetheratioofthewealthofthetop5%offamiliestothewealthofthepoorest20%becausethemedianwealthofthepoorestfamiliesiseitherzeroornegativeinmostyearsexamined.↩PertheU.S.CensusBureau,thesourceoftheseestimates,the90thpercentilehouseholdincomein2018was$184,292andthe10thpercentilehouseholdincomewas$14,629(incomesnotadjustedforhouseholdsize).↩TheGinicoefficientencapsulatestheshareofaggregateincomeheldbyeachpersonorhousehold.Ifeveryonehasthesameincome,orthesameshareofaggregateincome,theGinicoefficientequalszero.Iftheincomedistributionisperfectlyunequal,asinglepersonorhouseholdholdsallaggregateincome,theGinicoefficientisequaltoone.↩TheOECDisagroupof36countries,includingmanyoftheworld’sadvancedeconomies.TheOECD’sestimatesoftheGinicoefficientareforthefollowingyears:U.S.–2017,UK–2017,Italy–2016,Japan–2015,Canada–2017,Germany–2016,France–2016,andIndia–2011.↩ SignupforourweeklynewsletterFreshdatadeliveredSaturdaymornings ReportMaterials CompleteReportPDFToplineQuestionnaireInteractiveessay:Tworecessions,tworecoveriesAmericanTrendsPanelWave54Dataset TableofContents MostAmericansSayThereIsTooMuchEconomicInequalityintheU.S.,butFewerThanHalfCallItaTopPriority 1.Trendsinincomeandwealthinequality HouseholdincomesaregrowingagainafteralengthyperiodofstagnationUpper-incomehouseholdshaveseenmorerapidgrowthinincomeinrecentdecadesIncomegrowthhasbeenmostrapidforthetop5%offamiliesThewealthofAmericanfamiliesiscurrentlynohigherthanitsleveltwodecadesagoThewealthdivideamongupper-incomefamiliesandmiddle-andlower-incomefamiliesissharpandrisingTherichestaregettingricherfasterIncomeinequalityintheU.Shasincreasedsince1980andisgreaterthaninpeercountries 2.Viewsofeconomicinequality 3.WhatAmericansseeascontributorstoeconomicinequality 4.Viewsonreducingeconomicinequality Acknowledgments Methodology Related Video|Jan5,2022 ShortRead|Jul28,2021 Report|May18,2021 Feature|Jan12,2021 ShortRead|Nov24,2020 Topics PersonalFinancesEconomicInequalityEconomicPolicyEconomy&WorkIssuePriorities MOSTPOPULAR 1 Defininggenerations:WhereMillennialsendandGenerationZbegins 2 PoliticalTypologyQuiz 3 WhatthedatasaysaboutgundeathsintheU.S. 4 Majorityofadultssayabortionshouldbelegalinsomecases,illegalinothers 5 TwoDecadesLater,theEnduringLegacyof9/11 1615LSt.NW,Suite800Washington,DC20036USA (+1)202-419-4300|Main (+1)202-857-8562|Fax (+1)202-419-4372|MediaInquiries Politics&PolicyInternationalAffairsImmigration&MigrationRace&EthnicityReligionGenerations&AgeGender&LGBTFamily&RelationshipsEconomy&WorkScienceInternet&TechnologyNewsHabits&MediaMethodologicalResearchFulltopiclist EmailNewsletters Facebook Twitter Tumblr YouTube RSS AboutPewResearchCenterPewResearchCenterisanonpartisanfacttankthatinformsthepublicabouttheissues,attitudesandtrendsshapingtheworld.Itconductspublicopinionpolling,demographicresearch,mediacontentanalysisandotherempiricalsocialscienceresearch.PewResearchCenterdoesnottakepolicypositions.ItisasubsidiaryofThePewCharitableTrusts. 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