Graph of the Day: The Divergence of the Rich

I last wrote about income inequality by taking a look at the Gini coefficient for the United States. It's a great measurement for comparing countries from 20,000 feet, but for more detail we need to look at specifics, hence today's graph.

(Data from U.S. Census)

All right, let's talk about the middle lines first. The blue line is the median household income in the United States. In other words, half the households in the country made more than that, and half made less. The red line above it is the mean household income, what we get by adding up all of the household income in the country and dividing it by the number of households.

It's not uncommon for the mean and median of a data set to be a little bit different, but you'll notice that the difference between the two has been getting bigger over time. In this case, the mean is “pulled” up by a cluster of super-high income levels.

This is where the green and yellow lines come in. The green line is the cutoff for the bottom quintile of U.S. households; one in five families in the U.S. is at or below that level, and another 30% of families exist between the blue and green lines.

Of the top half of American earners, most exist between the blue and yellow lines. Only the top 5% of families are above that yellow line, and the higher up the income level you climb, the more ridiculous the numbers become. The cutoff for the top 1% has been bouncing around in the general vicinity of $350,000, or roughly twice the height of that yellow line.

Now look at the trends. The bottom 20% aren't any better off than they were thirty years ago, and the middle class have gained barely any ground. However, the richest people in this county have seen their income go up dramatically—and again, the higher up you go, the more dramatic the increase.

There's no rising tide lifting everyone's boat here. This is what happens when we rely on GDP without jobs, and it's why part of the solution is to increase the taxes on those at the top and use that revenue to drive job creation for the rest of us.

Posted in Economic Development | Related Topics: Economic Growth  Economic Inequality  Graphs 

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