Once we turn our attention to policy as a driving force behind trends in inequality, we need to understand the full historical arc of those policies. Top incomes shares plummet with the policy innovations of the New Deal but climb again as those innovations — in labor law, in social policy, in financial regulation, in taxation — were dismantled. The growth of inequality in the United States has been accompanied by an explosion of academic interest in the problem, and by remarkable advances in the availability, accessibility, and scale of the relevant data.
Implicit in the description of the past, and in the comparison with our peers, is a conviction that we can do better. Not well — and the rest of us are still paying the price.
Growing Apart: A Political History of American Inequality
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Income Inequality in the United States
Estimates of consumption inequality generally show lesser inequality than estimates of income inequality. Estimates of wealth inequality reveal a greater concentration at the top than estimates of income inequality, however. More recently, researchers have focused on the inequality in economic opportunity , such as in access to schooling or jobs. The Asian experience with inequality is partly driven by immigration.
One result was that the share of new Asian immigrants working in high-skill occupations decreased from to , and the share working in low-skill occupations increased. More recently, the Immigration Act of sought to increase the inflow of skilled immigrants. Coinciding with a boom in the technology sector, a new wave of Asian immigrants, many from India, followed under the auspices of the H-1B visa program.
Thus, since , there has been an increase in the share of Asian immigrants employed in high-skill occupations. Education levels and incomes vary widely among Asians living in the U. Census Bureau in conjunction with decennial census data. The period of analysis is to , from the decade marking the rise in inequality in modern times to the latest available data. The sample for the analysis is the U.
The focus of this report is on income inequality within the major racial and ethnic communities in the U. As evidenced by the rise in inequality from to , higher-income adults in the U. Thus, inequality among Asians increased overall as those at the top of the income ladder pulled away from those at the middle and bottom, and Asians at the middle also pulled away from those near the bottom. Lower-income whites, blacks and Hispanics, while losing ground to those at the top, mostly kept pace with those at the middle of their income distributions.
The trends in income growth also show that blacks made some progress in closing the gap with whites. Blacks at the median and at the 10th percentile experienced more of an increase in income than similarly situated whites, and blacks at the 90th percentile kept pace with whites.
Thus, lower-, middle- and upper-income Hispanics all lost ground to their white counterparts from to As it has with Asians, immigration has been an important part of the Hispanic experience in recent decades. The influx of lower-skill, lower-income immigrants likely exerted a drag on the measured growth in income for Hispanics. Differences in income within racial and ethnic groups are not the only sources of inequality in the U. The gaps in the standard of living across whites, blacks, Hispanics and Asians are also sizable and longstanding.
These gaps are usually measured through differences in the mean or median incomes of groups. In , Asians at the middle of their income distribution earned more than white, black or Hispanic adults at the middle of their income distributions. Asians also held the edge in standard of living over other groups at the top of the income distribution.
In contrast, lower-income Asians lagged behind lower-income whites. The state of income inequality within racial and ethnic groups and the gaps in incomes across them provide complementary, yet distinct, insights into the well-being of these groups of Americans. These factors include technological change, globalization, the decline of unions and the eroding value of the minimum wage. At the same time, the drivers of income inequality appear to have had a disproportionate impact on some racial and ethnic groups, as evidenced by the differences in the level of inequality and the degree to which it increased for each group.
That could be because of differences in the characteristics of workers, such as educational attainment greater among Asians and whites and the share foreign born greater among Asians and Hispanics. Also, larger societal forces may have affected some groups more than others, such as the disparately high rate of incarceration among black men see text box. The aforementioned differences in worker characteristics also contribute to the gaps in incomes across racial and ethnic groups.
In addition, the historical legacy and current impact of discrimination are considered to be important factors in these gaps. Some scholars hold the view that discrimination not only distorts the hiring practices of employers but also contributes to gaps in skills across groups, disadvantaging racial minorities prior to their entry into the labor market.
It is worth noting that overall income inequality in the U. For example, suppose that blacks, Hispanics and Asians had the same income distribution as whites. In that case, everyone at any given rung of the income ladder — lower, middle or upper — would have the same income regardless of race or ethnicity. Conversely, easing income inequality within racial and ethnic groups may have little impact on the gaps across groups.
Causes of Income Inequality
This would reduce inequality overall and within each group, but the gaps in income across groups would be unchanged. The level of inequality in the U. In the midst of this debate, it is worth noting that income inequality in the U. Cross-national comparisons of income inequality are often based on the Gini coefficient, a widely used measure of inequality see text box. The Gini coefficient in the U. Researchers interested in the economic progress of black Americans in the post-Civil Rights era have expressed concern that an increase in incarceration in recent decades may affect the estimated trends.
According to them, incarceration amounts to selective removal of individuals with limited earnings potential from the labor market. This could inflate statistical measures of the economic status of a group, such as its mean income, if the potential earnings of the incarcerated population are not accounted for in the analysis. This issue is of particular concern to researchers focused on the economic status of black men relative to that of white men.
The institutionalized population consists of people residing in correctional institutions, mental institutions, homes for the elderly and other similar institutions.
Currently, public-use versions of decennial census data and American Community Survey data do not separately identify the incarcerated population. To determine the impact of incarceration, researchers generally include the institutionalized population in their analysis, assigning people in institutions a wage based on a statistical imputation of their potential labor market earnings.
In effect, this amounts to the construction of a hypothetical counterfactual economy in which there is no incarceration, or no difference in incarceration rates by race and ethnicity. The main inference is that there has been little to no reduction in the black-white male earnings gap in recent decades if one accounts for the higher rate of incarceration among black men. Incarceration is also found to have had a negative impact on other labor market outcomes, such as employment, for black men. Although incarceration is an issue in analyses of the economic well-being of black men , its role in analyses of the economic well-being of the broader population is less certain.
In part, that is because institutionalization rates for the broader population are smaller. In the household sample used in this report, 1. By race and ethnicity the share in was highest among blacks 3. Would institutionalized adults, likely to have relatively low earnings if returned to the labor market, exert a downward pull on these amounts that exceeds the downward pull on the 90th percentile income?
The answer to this question cannot be known with certainty because the incarcerated population is not separately identified in public-use versions of Census microdata after and the potential labor market earnings of that population, even if identifiable, must be simulated. There is a countervailing force, however.
In this report, the income of a person is not his or her personal labor market earnings but what is afforded to the person by the combined resources of his or her household. That is likely to limit the possibility of a significant downward pull on incomes at the 10th percentile from the inclusion of the institutionalized population. Incomes are adjusted for household size and expressed in dollars.
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The pattern observed nationally is also present among whites, blacks, Hispanics and Asians, but to varying degrees. Changes in income at the various points of the income distribution were somewhat more balanced among blacks. Income growth for Hispanics lagged behind the growth for other racial and ethnic groups at most points of the income distribution. These gains in income were less than the gains for other groups at the three points of the income distribution, except for Asians at the 10th percentile.
The Asian experience is distinguished by sharp differences in the growth in incomes across the distribution.