9 Alarming Facts About Income Inequality in America

1. What is the root cause of rising income inequality?

The root cause of rising income inequality is the near stagnation of hourly wage growth for the vast majority of American workers over the past generation. This has led to a significant gap in income distribution, where the top 1% has seen extraordinary wage growth, while the bottom 90% have experienced minimal wage increases.

2. How much income would Americans have earned if income inequality had remained constant?

Had income distributions remained constant, Americans earning below the 90th percentile would have had an aggregate annual income of $2.5 trillion higher in 2018 alone. This amount is nearly 12% of GDP and could have more than doubled median income, providing an additional $1,144 per month for every working American in the bottom nine deciles.

3. What is the impact of income inequality on middle-class living standards?

The income growth of the middle three-fifths of American households since 1979 would have been significantly higher if income inequality had not increased. In 2007, the average income of the middle 60% of households was $76,443, but it would have been $94,310 if there had been no growth in inequality, representing a 23% difference.

4. How has the income share of the top 1% changed over time?

The top 1% has seen a substantial increase in their share of total taxable income. In 1975, they held 9% of the total income, while in 2018, they held 22%. This represents a direct transfer of income from the vast majority of working Americans to a handful at the very top.

5. What is the average annual income loss for median-income workers due to rising inequality?

Median-income workers have experienced an average annual income loss of about $42,000 due to rising inequality. Adjusted for inflation using the CPI, this number is even worse, with half of all full-time workers earning less than they would have if inequality had remained constant.

6. How does wealth inequality affect different racial and gender groups?

Wealth inequality affects different racial and gender groups significantly. For example, the average white man between ages 58 and 62 earned $2.9 million over his career, while the average Black man earned $1.8 million and the average Hispanic man earned $1.7 million. Women earn less overall, with the average white woman earning $1.7 million, the average Black woman earning $1.3 million, and the average Hispanic woman earning $883,000.

7. What are the policy solutions to reduce income and wealth disparities?

Policy solutions to reduce income and wealth disparities include standardizing pay data collection, implementing proactive audits to combat payment discrimination, and providing a federal job guarantee to ensure anyone who wants a job can access one. Additionally, policies like making tax deductions more progressive and promoting retirement savings through automatic enrollment in various types of retirement accounts can help families accumulate wealth.

8. How has median household income changed over the past few years?

The median household income in the United States experienced a resurgence in 2023, nearly returning to its 2019 levels. The inflation-adjusted median household income climbed by 4% to $81,610, marking the first rise since 2019 and restoring purchasing power for many Americans.

9. What is the outlook for lower-income residents in terms of consumer sentiment?

The outlook for lower-income residents remains bleak due to persistent inflation and higher borrowing costs. However, there are signs of potential inflation reprieve, particularly in regions like Florida where annual inflation has eased below the Feds 2% target. This could lead to some relief for Floridians in the months ahead.