In recent years income inequality in America has increased. Researchers have observed that the rich have become richer, relative to the middle and lower income classes, since 1980. One way of measuring income inequality is to rank the U.S. population by household income and divide it into five equally sized groups (quintiles). Researchers can then evaluate how much of the total income received by Americans each quintile receives. The U.S. Census Bureau has found that the highest quintile increased its share of total household income from around 44% in 1980 to 50% in 2010.(1)
In other words, by 2010 fully half of all household income in America was earned by the richest 20% of the population. Each of the remaining quintiles of the population lost income share over the same period.(2)
By 2010, the lowest quintile earned only 3.3% of total income.
Taking 1967 as the base year and calculating the percentage change in share of income earned by each quintile, the increase in inequality is even more apparent. While all four lower quintiles earn a lower income share in 2010 than earned in 1967, the highest quintile has seen an increase in share of income of 16.8% from 1967 to 2010. The lowest quintile, in contrast, has seen their income share decrease by 21.5% from 1967 to 2010.
Another way to look at changes in income distribution is to examine average income over time for members of each population quintile. The figure below illustrates that the average household income of the richest one fifth of Americans continues to grow at a much faster rate than the income of the lowest quintile, which increased in 2012 for the first time since 2006. The average income of the second quintile has been slowly declining since 2006.
While there is little question that income inequality has increased, there is less agreement regarding the principal causes. The decline of the manufacturing sector that has historically provided high wages for less educated workers coupled with expansion of the low wage, low skill service sector
is one factor often cited. Other factors that may have increased income inequality include the large influx of low skill immigrants,
increased reliance on low-wage, part-time and temporary jobs, a decline in union membership, a decrease in the real value of the minimum wage, and an increase in single parent families
What Value Education?
Stagnant wages in low skill occupations since 1980 means that having a high school diploma does not promise future prosperity. Among people old enough to have completed their education (at least 25 years of age) in 2010, over one-quarter (29.2%) of those who did not finish high school were poor. The corresponding poverty rate for those who completed high school but went no further was 13.5%. In contrast only 4.3% of people with at least a college degree were poor.
Racial and ethnic disparities in income mirror higher poverty rates among blacks and Hispanics. As shown below, blacks ($33,321) and Hispanics ($39,005) had lower median annual incomes than non-Hispanic whites ($57,009) or Asians ($68,636) in every year between 2002 and 2012.
As shown below, racial and ethnic minorities were disproportionately represented among poor people in 2010. Whereas blacks made up one eighth of the U.S. population, nearly one quarter of all poor people were black (23.1%). Similarly, whereas about one sixth of the U.S. population was of Hispanic ethnicity, more than one quarter of poor people identify as Hispanic (28.7%).(3)
(1)Members of the top quintile in 2010 had annual incomes of at least $100,000.
(2) Some of the increase in inequality between 1992 and 1993 is attributable to changes introduced in 1993 in the way the U.S. Census Bureau measures income. Nonetheless, researchers agree that the overall trend during the period from 1980 to 2010 was one of increasing inequality.
(3)Note that there is some overlap in the categories, since Hispanics may be of any race. The categories in the figure exclude individuals who identified themselves as being of more than one race.