Yet Another Chart on Income Inequality

Not to compete with recent information from Mother Jones, Huffington Post, Reuters, the NY Times, and many others, I too pulled some US census data to look at how incomes have changed over the last 45 years.

It was pretty easy to find and the census bureau had already broken the population into easily comparable segments (quintiles). I combined the data and standardized the numbers for inflation. To make it even easier to digest, I made a nifty graph. There is a lot of information on it, so let me walk you through it…

change in income limits graph-01

Click to enlarge!

 

First off, the graph shows how much household incomes have changed between 1967 and 2011. The population is broken into fifths, and includes the lower limit of the top 5% of income earners (in green). The first striking piece of information I found is that Americans don’t make as much as I thought: 80% of all households make less than $100,000 per year and middle-class actually means a household income of around $60,000 per year. These numbers are different than what Americans think and extremely different than what the Government thinks.

The next idea I had was to see the actual amount, in percent as well as dollars, incomes have changed for each of the population segments over the last 45 years. The change is shown on the far left of the graph.

change in income

Change in income since 1967.

The two lowest cohorts (brown and purple on the chart), about 40% of all US households, have seen their incomes rise by only about $3,500 since 1967 (adjusted for inflation). That’s an average increase of about $77 per year. The cohort which saw the lowest percentage growth of income was actually the second fifth (those making around $38,500/year), which should be considered “lower-middle class” households.

The other income cohorts did progressively better over the last 45 years. The top fifth and top 5% (about 25% of all households) saw the greatest increases (+46% and +66%, respectively). In fact, the top fifth’s incomes increased 1.5 times more than the gains of the other 80% of all households combined, and the top 5% saw an increase of 3.5 times more than the gains of the lower 80% of all households combined.  Please excuse the cliché, but the rich (household incomes >$100,000) got much richer than everyone else.

Another piece of information I wanted to show was when the income cohorts peaked, which is symbolized by a gold star on the chart.

income peaked 

When I looked for an income peak, I thought all cohorts would have peaked at the same time. Instead, households reacted differently at different times.

  • The best time to have been in the lowest 60% of households was during 1999-2000.
  • The best time to have been in the top 20% was actually during 1997-1998.
  • The best time to have been in the top 5% was actually in 2006.

What this shows is that, while the 2006 recession reduced incomes for all cohorts, the bottom 80% was already in decline by 2001.

The next question I had was how badly did the 2006 recession impact household incomes? Well, the lower the household income, the harder they were hit.

recession impacts

Impacts of the recession.

For the top 5% of income earners, their incomes were brought back to 1998 levels, while the lowest 20% of households were brought back to 1994 levels.

I have also added major US economic events to the graph in order to provide a little bit of context to the bumps and drops in household incomes. I have refrained from adding presidential terms and a party’s control of congress since that would add a whole other unnecessary level of complexity to the chart.

In summary, the US overall had far greater income-equality in 1967. While the lowest 60% of households have remained fairly equal with respect to each other, the top 25% has seen the greatest increases, with the top 5% receiving a disproportionate share of those gains. Whatever your political persuasion may be, the numbers clearly show that the past 45 years of policy and economic growth has disproportionately favored those making more than $100,000 per year.

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One Comment on “Yet Another Chart on Income Inequality”

  1. Very good blog! Do you have any tips for aspiring writers?
    I’m planning to start my own blog soon but I’m a little lost on everything.
    Would you suggest starting with a free platform
    like WordPress or go for a paid option? There are
    so many choices out there that I’m completely confused ..
    Any suggestions? Thanks a lot!

    Like

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