People are fond of the saying the rich get richer and the poor get poorer. Many people believe the middle class is shrinking as the upper class gobbles up more wealth, creating ever increasing …
People are fond of the saying the rich get richer and the poor get poorer. Many people believe the middle class is shrinking as the upper class gobbles up more wealth, creating ever increasing amounts of income inequality in this country.
These concerns make for great headlines and engaging reads, whereas most people find data less interesting. If the opposite were true, more people might be aware these fears don’t stand up to scrutiny.
Last month, the Census Bureau released its annual report on income and poverty in the United States, with figures through 2018. The report indicated that income inequality has increased, but the context is critical.
In 1993, about 49 percent of total income went to the top 20 percent of households. In 2017, that share had increased to only 51.5 percent. In the same time period, the share of total income going to the top 5 percent of U.S. households increased from 21 percent to 22.3 percent. These very small increases are not statistically significant and don’t support the claim that top-earning households are taking meaningful increases of wealth in this country.
Another measure of inequality is the Gini index, which can be used to show trends over time. A score of 1.0 represents a place where one household receives all the income, while a score of 0.0 indicates a country where everyone earns exactly the same income. Between 1993 and 2017, the Gini index of income inequality in the U.S. showed almost no change. For the past several decades, it’s fluctuated between 0.46 and 0.48, rising to 0.485 last year. In fact, income inequality in America has been remarkably stable for as far back as we have reliable data.
Another scare is the “disappearing middle class.” This one is true, but not for the reasons most people fear. In 1967, only 9 percent of U.S. households earned $100,000 or more, in 2017 dollars. In 2017, over 29 percent were in that upper-income category. This means the share of U.S. households in the upper middle class has tripled in the last 50 years. The middle class is disappearing because many more people have moved into higher income levels.
Unfortunately, challenging popular fears is often equated with an immoral position that doesn’t at all reflect the point being made. None of this data suggests poverty is no longer a problem. Of course everyone should be charitable to those in need.
Disputing fears of income inequality is not arguing poverty is vanishing altogether. Fears we’re all getting poorer undermines our ability to be grateful for what we have and may limit our willingness to give. Contrary to popular belief, we’re all in a much better position to help those less fortunate than we ever were.