Trends in Income Distribution

Trends in Income Distribution Wealth & Poverty 1.Poverty rose from the late 1970’s until the early 1990’s, both in absolute numbers & as a percentage of the population. 2.There was a very slow fall but poverty never declined to its pre-1979 level.**

Trends in Income Distribution Wealth & Poverty 3.The poverty rate rose after the recession. 7.Poverty remained at unusually high levels during the 2000’s, even before this current recession. **

Trends in Income Distribution Wealth & Poverty Cont’ 1.There have been dramatic increases in the concentration of wealth and income in the hands of the richest 0.1%, the richest 1.0% & the richest 10%. 2.This trend has continued non-stop since the late 1970’s, and accelerated during the 1980’s and 1990’s. **

Trends in Income Distribution Wealth & Poverty Cont’ 1.Since the 2000 recession, the incomes of middle Americans have declined. 2. This is the first time on record that the average American is worse off in a growth phase since WWII.**

Trends in Income Distribution Wealth & Poverty Cont’ In this section we will try to understand what has caused this trends.**

Statistical Concepts

Mean – the average. Median – exactly ½ of the numbers are above that figure, & exactly ½ are below it.

Statistical Concepts Mean Income – average income Median Income – exactly ½ of all incomes are above that income, & exactly ½ are below that income.

Statistical Concepts Household Income – income of the entire household, the total incomes of everyone in that household. Real Household Income – income of the entire household, adjusted for inflation.

Statistical Concepts Mean Real Household Income – average income of all households, adjusted for inflation. –We find the total income for each household in the group –We then find the average income for this group of households –Last, we adjust for inflation.

Statistical Concepts Median Real Household Income – exactly ½ of all household incomes are above this inflation adjusted income, and exactly ½ of all household incomes are below this income. This statistic is for a group of households.

Statistical Concepts Net worth – the value of all your wealth minus all of your debts. Includes houses. Net financial assets – all types of savings & investments minus your debts. Stocks – shares of ownership of large companies. Bonds – company or government debts (IOU’S).

Statistical Concepts Common stock, excluding pensions – means direct ownership of stocks, and indirect ownership. Common stock, – means direct ownership of stocks, indirect ownership, and ownership of stocks through retirement systems.

Statistical Concepts Non-equity financial assets – other types of financial assets, such as savings accounts, or bonds Housing equity – the value of property, such as homes, minus the amount owed on them

Statistical Concepts Quintiles – a fifth of any population, exactly 20% of the group is in one quintile. Households Divided by Fifths – take the total number of households in the U.S. & divide them into 5 groups of 20% each. **

Statistical Concepts Households Divided by Fifths: –Bottom or First = The Poor –Second = Working Class –Third = Lower ½ of the Middle Class –Fourth = Upper ½ of the Middle Class –Fifth = Near Rich to the Rich

Statistical Concepts Households that earn more than $100,000 are in the top 20% of all American households. Their share of national income is now 49.4% of all income earned by all households.**

Statistical Concepts Households that earn less than $21, 954 are in the bottom 20% of all American households. Their share of national income fell to 3.4% of all income earned by all households.**

Source United States Census Bureau, data released September 28, 2010.**

Share of richest 1% What is this chart about? Briefly describe, in English, the general pattern. What do you notice about the two peaks? What happened to the US economy right after the two peaks?

Distribution of household assets What is this chart about? Briefly describe, in English, the general pattern.

Distribution of wealth What is the share of stock, including pensions, of the richest ½ of 1%? What is the share of stock, including pensions, of the richest 1%? What is the share of stock, including pensions, of the richest 10%?

Distribution of wealth What is the share of non equity assets, including pensions, of the richest ½ of 1%? What is the share of non equity assets, including pensions, of the richest 1%? What is the share of non equity assets, including pensions, of the richest 10%?

Real Family Income Growth The same questions will be asked for all three time frames: – – –

Real Family Income Growth Describe, in plain English, what happened to the real family income of the: -1 st quintile -2 nd quintile -3 rd quintile -4 th quintile -5 th quintile

Median Real Family Income What is real family income? What is median real family income? Is this data adjusted for inflation? What happened to median real family income between 1989 and 2006?