Perry on the State of Income Inequality in 2018

Over at the American Enterprise Institute, economist Mark Perry usefully summarizes data from the Census Bureau’s annual report “Income and Poverty in the United States:”

Household demographics, including the average number of earners per household and the marital status, age, and education of householders are all very highly correlated with American’s household income. Specifically, high-income households have a greater average number of income-earners than households in lower-income quintiles, and individuals in high-income households are far more likely than individuals in low-income households to be well-educated, married, working full-time, and in their prime earning years. In contrast, individuals in lower-income households are far more likely than their counterparts in higher-income households to be less-educated, working part-time, either very young (under 35 years) or very old (over 65 years), and living in single-parent or single households.

The good news about the Census Bureau is that the key demographic factors that explain differences in household income are not fixed over our lifetimes and are largely under our control (e.g., staying in school and graduating, getting and staying married, working full-time, etc.), which means that individuals and households are not destined to remain in a single income quintile forever [emphasis in original].

Despite the gloomy rhetoric surrounding the state of income inequality in America, this data presents a picture that is much more encouraging. Especially reassuring is the Census Bureau’s finding that the ratio of annual income between the top and bottom quintiles falls from 17:1 to 3.2:1 when comparing the incomes of individual earners in those quintiles.

Finally, I’ve reproduced Perry’s table here for quick reference. The post itself does a great job giving context to and interpretation of the numbers, and I recommend reading it in its entirety.