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Income Inequality in the United States, 1947-1998

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Measurement Issues 4 Shortcomings of Income as Measure of Resources 4 Presentation of Facts –Frequency Distribution –Lorenz Curve 4 Summary Measures of Income Inequality –Gini Coefficient –Other Measures

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Frequency Distribution

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The Lorenz Curve 4 The percentages of the population from poorest to richest on the horizontal axis and the percentages of income enjoyed by bottom X% of population on vertical axis 4 The greater the distance between the line of equality and the Lorenz curve, the more unequal the distribution

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The Distribution of Income Less Equal in 1998 than in 1949

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The Gini Coefficient 4 The ratio of the difference between the line of perfect equality and the Lorenz curve to the triangular region underneath the diagonal 4 G=0 indicates perfect equality. G 1, inequality grows 4 G=0.5n 2 ∑ i ∑ j |y i -y j |

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The Gini Coefficient Has Increased Since 1972.

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The Gap Between Rich and Poor Has Increased

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Racial Gaps Persist

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The Gender Gap Has Narrowed.

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The Poverty Rate 4 Define An Income Required for Minimum Subsistence 4 Percentage of Persons Living in Households with Incomes Below This Threshold Are Poor

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Poverty Rates Have Fallen in Recent Years.

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The Poverty Status of Elderly Has Improved, But That of Children Has Not.

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What Happened? 4 How do we explain the movement toward equality from 1947 through the 1960’s? 4 How do we explain the widening inequality in the 1970s and 1980s? 4 What do we predict for the report to be released in September?

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Shortcomings of Inequality Measures 4 Income is measured as income in a single year. No indicator of mobility 4 Size of family units or households vary so needs vary 4 Current income is inadequate measure of consumption possibilities –Wealth allows access to goods –Public goods –Variationsn in living costs.

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