The information to make the table below was taken from the US Census.
It reports the share of total income by income class. The bottom fifth refers to those at the bottom of the income scale. They earned at most $28k in 2019. Those in the top fifth earned more than $143,000 in 2019. While the chart reports five groups that each represented 20% of the population, the final row has a richer group -- those in the top 5%.
The numbers in the table show how shares of income changed between 1967 and 2019.
Before I get to the changes, it helps to know where we started. A lot has happened since 1967 when I was a junior at Georgia Tech. In 1967, the poorest 20% earned only 4% of the income. The poorest 60% only captured 32.1% of all earnings. In 1967, the top 5% of earners accounted for 17.2% of income earned.
Clearly, as far back as 1967, the distribution of income was not very equal.
What has changed since 1967?
The share of income going to the poorest group fell from 4.1% to 3.1%. The decline was spread evenly over the two time periods (1967 to 1993 and 1994 to 2019).
The income share going to the top 20% of earners rose by 7.3% over the whole period but 5.3% of that came before 1994.
Share changes for the remaining groups largely occurred in the first period relative to the second.
What we can conclude from the data is that change was more pronounced before 1994 and has slowed since then.
Comparing more recent data doesn't change anything. The same patterns emerge.
One point to make about this data. People moved in and out of these income classes every year. So the category is not the same people each year. But the lowest 20% is always comprised of the people at the bottom of the income scale.
What else? To those people who believe something has fundamentally changed lately to change or worsen distribution income, I say that maybe they need to look further. A half-century of data supports the idea that not much has changed.
While the column of figures under 2019 is not very pretty, it does not very much differ from those numbers under 1967 or 1993. Should we want to make the numbers under column 2045 look a lot better, we might want to do some harder work to understand what is going on here.
Between 1967 and today a lot of words and much money have been devoted to making the income distribution less unequal. Yet, things have not changed much. What is missing here? We put a man on the moon. Why can't we make incomes more equal?
1967 1993 2019 Change
Whole First Second
Bottom 4.0 3.6 3.1 -0.9 -0.4 -0.5
Second 10.8 9.0 8.3 -2.5 -1.8 -0.7
Third 17.3 15.1 14.1 -3.2 -2.2 -1.0
Fourth 24.2 23.5 22.7 -1.5 -0.7 -0.8
Fifth 43.6 48.9 51.9 +8.3 +5.3 +3.0
Top 5% 17.2 21.0 23.0 +5.8 +3.8 +2.0
Dear LSD. Why can’t we make incomes more equal? Hm-m-m-m-m, which income should be “more” equal? Yer blog mentions total income. Does that include wages, salaries, dividends/distributions from LLCs/Sub S/C corps, 401k, 403b, IRAs, Social Security, capital gains, etc.? My tuna eyes’ raised eyebrows (bet you didn’t know tunas have eyebrows) trying to git my head around my tail wunner’n why-0-why you’d even pose that unanswerable question. Geese, can you pickture a tuna trying to wrap its head ‘round its tail? Ouch! Broke/bent a few scales. Letz do a thought puzzle. Letz assume your total income is only wages/salaries. Whose total income would you raise and whose lowered to achieve equality? Think there’d be a revolution? Letz assume we achieve that equality without revolution. Would the adherents/promoters of income equality be satisfied not including the other sources of income? And consider that none of this addresses the impact of the tax code on after-tax income. Wut pretzel-contusion changes would you suggest to the code to affect equality of after-tax income to satisfy the adherents/promoters of income equality?
ReplyDeleteThis mindless inquiring tuna wantz to know not only yer answerz to these inquiries but especially why-0-why you’d even pose that unanswerable question. Have you OD’d on JD?
Dearest Tuna, I have not OD'd on anything that I know of. The Census data is pretty inclusive on the earned income side but it does not, importantly, include income from transfer payments nor is it net of income taxes. Thus, it overstates inequality. The transfers and taxes are intended to make incomes after taxes and transfers more equal. I wrote what I wrote mostly to ask those folks who want incomes to be even more equal, why with all we've done over the years to equalize, the before tax figures haven't gotten more equal. Apparently they can shift money around but whatever has been done has not had a permanent impact. After 60 years, why hasn't the welfare state improved these numbers? If they want more equality, then what else would they do? It's one thing to play Robin Hood. It is another to try to reduce poverty in a sustainable way. Its another thing to find ways to help people permanently move up the income latter. With all the talk about income inequality why have these folks been so ineffective? That's why I wrote this piece. I am not suggesting that there is an easy way to improve income inequality. There seems to be a lot of pretty lousy ways, however.
DeleteDear LSD. You ask, rhetorically I assume cuz yer not gunna git an answer from them folkz, “With all the talk about income inequality why have these folks been so ineffective?” Tuna will rise (ahem . . ) to the occasion. Drum roll-l-l-l-l. Ready? Cuz inequality is inherently natural. Cuz govomit solutions have proven and will continue to prove wasteful, expensive, and . . . ready? . . . . INEFFECTIVE. E.g. war on drugs, war on poverty . . . and soon to occur war on wealth. There are those that have and those that have not. There are those that will and those that will not. Likely . . . cuz it’s natural . . . that those that have not are also those that will not. It’s elementary my dear LSD.
DeleteYou are a very wise Tuna. But you miss the critical point. It has little to do with government solving an apparent problem and everything to do with the snake oil salesman. If kind hearted and generous folks believe the snake oil will work -- then they will support it and the politicians that finance the oil. The problem is not so much the pols but it is us. We believe that shit. Smart people means no snake oil.
DeleteDear LSD. The wise Tuna protests yer saying he missed yer veiled surreptitious point “that it has little to do with govomit solution.” The only way “those” folkz can effect income equality (no matter how the Census defines inequality) is via govomit action. “Those” folkz naturally know inequality is natural and that the “have notz” and “will notz” naturally won’t wait for private-sector solutions: Therefore and henceforth their only course of action is thru govomit. Likely, snake oil will be the lubricant that allows govomit to slither govomit solutions into policy. As with all costs being variable in the end, all solutions “those” folkz embrace to solve society’s ills in the end are govomit. It's their natural way, naturally.
DeleteI think we mostly agree but are making different points. You seem to believe that failing a private solution we move on to a government one. There is some presumption on your part that these folks believe they can impact the problem. I am saying something more sinister. I am saying they don't know or care if their solution works -- they are mostly motivated by the appearance of doing something. They want to get elected and reelected. So long as the voting public is not smart, the pols will play this game on infinitum. We will continue drinking the snake oil.
DeleteI would be very interested in the post-transfer-payment numbers. Peoples Republicans spend a lot of time debating the Reagan tax cuts...and other policies. It would be even more interesting if the numbers were displayed graphically. A lot of hay has been made about new refundable credits and their potential to reduce child poverty (and the fear that they might disincentivize work). Theoretically, a graph showing earned income plus transfer payments minus taxes (which should be PLUS taxes for refundable credits near the bottom of the scale) should show a noticeable bump for that segment of the population, at least I presume it will from the media.
ReplyDeleteThanks Malcolm. A cursory look around finds that it is not easy to find what you are asking for. The data I am finding is mostly old and the articles that report on the topic are hard to compare because of different time periods. But the main point is easy. If you count taxes and transfers the implications for income inequality are clear. There is less inequality once taxes and transfers are counted. In the articles I saw, the difference is not great but it is clear. As to the most recent actual and proposed legislation, that might affect things even more but there is no good data to measure yet. One thing to watch is the effect of legislation on incentives. What happens to labor income when transfer income rises? What happens to tax reveneues when tax rates rise? Let's keep watching.
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