By Fred Kammer, S.J.
In 1986, writing in their pastoral letter Economic Justice for All, the U.S. bishops observed this about the state of income inequality in this country:
In comparison with other industrialized nations, the United States is among the more unequal in terms of income distribution. Moreover, the gap between rich and poor in our nation has increased during the last decade. These inequities are of particular concern because they reflect the uneven distribution of power in our society. They suggest that the level of participation in the political and social spheres is also very uneven. (No. 184)
The bishops could hardly have imagined that the inequality of a quarter century ago (measured in 1983 numbers) not only would not decrease, but it would rapidly continue to increase to the present.
In figures released in April, 2009, the Congressional Budget Office (CBO) indicated that the richest one percent of U.S. households had its largest share of after-tax income since 1979 (the first year of CBO data) and the middle fifth of U.S. households and the lowest fifth of households had their lowest shares on record. In terms of dollars adjusted for inflation, the average household after-tax incomes for the years 1979 and 2006 are reflected in the following table, with the “share” of U.S. household income in the row beneath the average income figures:
|
Year |
Lowest Quintile |
Second Quintile |
Middle Quintile |
Fourth Quintile |
Highest Quintile |
|
Top 10%
|
Top 5% |
Top 1% |
|
1979 Income |
$14,900 |
$30,100 |
$42,900 |
$56,100 |
$98,900 |
$125,200 |
$164,900 |
$337,100 |
|
|
1979 Share |
6.8% |
12.3% |
16.5% |
22.3% |
42.4% |
27.6% |
18.1% |
7.5% |
|
|
2006 Income |
$16,500 |
$35,400 |
$52,100 |
$73,800 |
$184,400 |
$265,500 |
$400,400 |
$1,200,300 |
|
|
2006 Share |
4.7% |
9.5% |
14.3% |
20.3% |
52.1% |
38.1% |
28.5% |
16.3% |
As you can see from this table,1 the lowest-income fifth of U.S. families have seen their income go up only 11% ($1,600) in twenty-eight years. And their share of family income has actually declined from 6.8% in 1979 to 4.7% in 2006. Another way of thinking about these “quintiles” is to imagine five families each getting a share of $100 dollars. The poorest family gets $4.70 (they used to get $6.80), while the richest family gets $52.10 (they used to get $42.40).
“Middle America” (if we use the middle fifth of U.S. families) saw their income go up from $42,900 in 1979 to $52,100 in 2006. But their share of U.S. family income went down from 16.5% to only 14.3%. The dollar increase per year is about $328 per family, a very modest increase in view of the number of families who have gone from one wage-earner to two during this period.
The richest fifth of families had their average income increase from $98,900 in 1979 to $184,400 in 2006. However, when the richest fifth are broken down in turn to look more closely at the top 10 percent, then top five percent, then top one percent, the data reveals even more stark contrasts and wider-than-ever gulfs between not only the wealthy and the poor, but between the wealthy and the middle-class in the nation. The top one percent, whose average income increased from $337,100 to $1,200,300 over twenty-eight years (a whopping 256%), now has an average income that is 23.0 times higher than the middle-fifth of families and 72.7 times higher than the poorest fifth of families. In 1979, it was only 7.9 times higher than middle-income families and 22.6 times higher than the poorest families. These two income gaps have tripled since 1979.2
To see the changes in income graphically, the disparities among U.S. families are dramatically highlighted and the impact of economic imbalances and governmental tax and income policies are laid bare:
It is important to note that this chart3 reflects: (1) after-tax income calculated on a base of all income received by the family, including all in-kind benefits (Medicare, Medicaid, employer-paid health insurance, food stamps, housing assistance, etc.); and (2) individual federal income taxes, payroll taxes, and household shares of federal corporate and excise taxes.
Another way of looking at the same data is to see the changes in the “shares” of household income in the United States reflected in the pie charts below. As the top tier of families has increased their share of family income in the United States, the relative shares of the other four quintiles (the other 80% of families) have declined. Nevertheless, some in politics continue to argue for increasing tax cuts focused on the top earners which already were substantially enlarged in the early days of the Bush administration and which are reflected in part in the great increases of after-tax income of the top 20% of families and, even more, the very richest of those.
Shares of After-Tax Income—1979 and 2006
| 1979 | 2006 |
|
|
|
It should be noted here that, while the current economic downturn surely will reduce the substantial gains made by upper-income families in terms of their investments, the lesson of the dot-com downturn of the early part of this decade was that these families quickly made up their losses when the markets recovered. In addition, since high unemployment will remain a feature of the economy even after the markets recover, families at the lower and middle ranges of income will continue to suffer longer than those at the top.
The Picture in the Gulf South
The same growing inequality is reflected in the five states of the Gulf South, sometimes with even greater disparities among income groups. Analyzing only the income of three of the five quintiles of families in each Gulf state—the poorest 20 [ercemt, the middle 20 percent, and the richest 20 percent—a study4 by the Center on Budget and Policy Priorities compared income shares over about a seventeen year period from 1987-89 to 2004-2006. Their study revealed the changes in terms of average annual income for families within each group and also measured a “gap” between richest and poorest and richest and middle income groups based on the ratio between them:
|
Alabama |
1987-89 Income |
2004-07 Income |
$ change |
% change |
|
|
Poorest fifth |
$12,574 |
$13,280 |
$706 |
5.6% |
|
|
Middle fifth |
$34,668 |
$43,445 |
$8,777 |
25.3% |
|
|
Richest fifth |
$79,043 |
$112,804 |
$33,760 |
42.7% |
In Alabama, the gap between richest and poorest families is second largest in the nation.
In Alabama, the gap between richest families and those in the middle is 18th largest in the nation.
|
Florida |
1987-89 Income |
2004-07 Income |
$ change |
% change |
|
|
Poorest fifth |
$15,102 |
$17,436 |
$2,335 |
15.5% |
|
|
Middle fifth |
$40,236 |
$47,062 |
$6,825 |
17.0% |
|
|
Richest fifth |
$94,887 |
$130,840 |
$35,953 |
37.9% |
In Florida, the gap between richest and poorest families is 15th largest in the nation.
In Florida, the gap between richest families and those in the middle is seventh largest in the nation.
|
Louisiana |
1987-89 Income |
2004-07 Income |
$ change |
% change |
|
|
Poorest fifth |
$11,687 |
$15,555 |
$3,868 |
33.1% |
|
|
Middle fifth |
$36,644 |
$41,755 |
$5,111 |
13.9% |
|
|
Richest fifth |
$92,381 |
$113,499 |
$21,119 |
22.9% |
In Louisiana, the gap between richest and poorest families is 18th largest in the nation.
In Louisiana, the gap between richest families and those in the middle is ninth largest in the nation.
|
Mississippi |
1987-89 Income |
2004-07 Income |
$ change |
% change |
|
|
Poorest fifth |
$11,540 |
$14,205 |
$2,665 |
23.1% |
|
|
Middle fifth |
$32,453 |
$39,924 |
$7,471 |
23.0% |
|
|
Richest fifth |
$78,595 |
$117,454 |
$38,859 |
49.4% |
In Mississippi, the gap between richest and poorest families is third largest in the nation.
In Mississippi, the gap between richest families and those in the middle is second largest in the nation.
|
Texas |
1987-89 Income |
2004-07 Income |
$ change |
% change |
|
|
Poorest fifth |
$13,430 |
$16,088 |
$2,657 |
19.8% |
|
|
Middle fifth |
$40,046 |
$44,574 |
$4,528 |
11.3% |
|
|
Richest fifth |
$93,846 |
$126,658 |
$32,813 |
35.0% |
In Texas, the gap between richest and poorest families is ninth largest in the nation.
In Texas, the gap between richest families and those in the middle is fifth largest in the nation.
In each state the income increases were even more dramatic for the very richest families in the top five percent or top one percent of the population. However the focus in the tables above is on the families in quintile groupings (bottom, middle, and top 20 percent). What the figures reveal in any case is the vast disparity of income in American families and the increasing inequality that, as a matter of social injustice, should be of major concern to policymakers and advocates.
1. Congressional Budget Office, April 2009, (accessed 2/19/10).
2. Income Gaps Hit Record Levels in 2006, New Data Show, Center on Budget and Policy Priorities, Arloc Sherman, April 17, 2009 (accessed 2/19/10).
3. Ibid., drawing on data from the CBO.
4. Pulling Apart: A State by State Analysis of Income Trends, Center on Budget and Policy Priorities, April 9, 2008 and state data sheets (accessed 2/19/10).