“Distribution of Income” written by Frank Levy for The Concise Encyclopedia of Economics. It discusses the history of income inequality in the United States in the 2oth century. A couple interesting comments about the 80s and why people felt that the Middle Class was disappearing:
When incomes grow rapidly, more inequality means that the poor get richer but the rich get richer faster. But when inequality increased in the slow-growth eighties, some groups’ incomes fell in real terms. Between the business cycle peak of 1979 and the next business cycle peak of 1989, the average income of the poorest fifth of families fell from $10,900 to $10,200, while the average income of the top fifth grew from $89,600 to $97,600. Moreover, the price of two key pieces of a middle-class life—a single-family home and a college education—grew faster than the general rate of inflation and faster than average incomes. For all of these reasons, slow income growth played a key role in perceptions of a vanishing middle class . . .
. . . even though overall family income inequality has not increased very much.
Tagged as:
Distribution of Income,
Education,
Inflation,
United States
While seaching for more income research I stumble across a reference to Census and Fed reports about income and wealth at independentsources.com but they link to johnbatchelorshow.com which is copy of an op-ed piece from The Wall Street Journal. (Unfortunately neither site links to the actual reports.)
But this quote from the op-ed caught my eye:
Back in 1967, the income range for the middle class (i.e., the middle-income quintile) was between $28,000 and $39,500 a year (in today’s dollars). Now that income range is between $38,000 and $59,000 a year, which is to say that the middle class is now roughly $11,000 a year richer than 25 to 30 years ago. This helps explain why middle-income families can buy things like cable TV, air conditioning, DVD players, cell phones, second cars and so on, that were considered mostly luxury items for the rich in the 1950s and ’60s.
The upper-middle class is also richer. Those falling within the 60th to 80th percentile in family income have an income range today of between $55,000 and $88,000 a year, which is about $24,000 a year higher than in 1967. This rapid upward income mobility indicates that the great American Dream, in which each generation achieves a higher living standard than their parents, is alive and well.
I looked at both the Census’ Historical Income Tables for Households and for Families and it looks like the household data is a closer match to the data in the quote above but neither is an exact match. (Earlier I had graphed the share of family income going back to 1947 based on Census data, which is why I knew about the data tables. )
I went ahead and graphed the income ranges for the “middle class” 40-60 percentile and the “upper middle-class” 60-80 percentile mentioned in the op-ed (1967-2004), for both households and families. While the 40% and 60% lines are increasing over time it is the 80% line that is increasing the most. In other words, the higher your income the greater your increase in income.
Addendum:
I am added the percentage increase for each chart
Household – consists of all the people who occupy a house, an apartment or other group of rooms, or a single room occupied as separate living quarters.
40th percentile = 24%
60th percentile = 39%
80th percentile = 55%
Family – a group of two people or more related by birth, marriage, or adoption and residing together.
40th percentile = 34%
60th percentile = 52%
80th percentile = 68%
Looking at the definitions some of the differences between household data and family data could be due to an increase in two-income families.
Tagged as:
Blog,
Income - High,
Income - Middle,
Income - Total, Aggregate,
Line Graph,
United States,
US Census
by Catherine on February 20, 2006
in Uncategorized
I found this at the National Bureau of Economic Research. The authors of the paper Where Did the Productivity Growth Go? Inflation Dynamics and the Distribution of Income are investigating why a bigger share of econcomic growth has been captured by high income earners. From the abstract of this paper:
A basic tenet of economic science is that productivity growth is the source of growth in real income per capita. But our results raise doubts by creating a direct link between macro productivity growth and the micro evolution of the income distribution. We show that over the entire period 1966-2001, as well as over 1997-2001, only the top 10 percent of the income distribution enjoyed a growth rate of real wage and salary income equal to or above the average rate of economy-wide productivity growth . . . We distinguish two complementary explanations, the “economics of superstars,” i.e., the pure rents earned by sports and entertainment stars, and the escalating compensation premia of CEOs and other top corporate officers. These sources of divergence at the top, combined with the role of deunionization, immigration, and free trade in pushing down incomes at the bottom, have led to the wide divergence between the growth rates of productivity, average compensation, and median compensation.
Tagged as:
Distribution of Income,
Inflation,
NBER,
Trade
by Catherine on February 16, 2006
in Uncategorized
A list of highest paid CEOs, according to Forbes, based on their salary and bonus, vested restricted stock grants and the value realized from exercising stock options during the just-concluded fiscal year.
The number 1 CEO is:
Terry S Semel
Total Compensation: $230.6 mil (#1)
Terry S Semel has been CEO of Yahoo (YHOO) for 4 years. Mr. Semel has been with the company for 4 years . The 62 year old executive ranks 1 within Software & Services
Tagged as:
CEO and Executives,
Forbes,
Income - High,
Income - Individual
A report written in 1999 by two researcher at the Heritage Foundation.
They point out some issues to be aware of when looking at income statistics from the Census (and why I have been using data from the Congressional Budget Office which address some of their concerns).
However, their critique focuses on the difference between the bottom 20% and the top 20%. The large amount of income concentrated in the top 5% is not part of their discussion nor is there any mention of the fact that the share of income going to each quintile has changed, regardless of how you measure it.
Tagged as:
Congressional Budget Office,
US Census
Visualizing Economics was created by 
View my LinkedIn Profile
Email me at
catherine[at]mrdiconsulting.com
Subscribe via RSS
Become a fan on Facebook
Follow me on Twitter
History of income inequality in the United States
by Catherine on February 28, 2006
in Critiques and Commentary
“Distribution of Income” written by Frank Levy for The Concise Encyclopedia of Economics. It discusses the history of income inequality in the United States in the 2oth century. A couple interesting comments about the 80s and why people felt that the Middle Class was disappearing:
Tagged as: Distribution of Income, Education, Inflation, United States
{ 1 comment }