Share of Income

We read a news report that GDP Gross Domestic Product increased at an annual rate of 3% in 10Q1 (Bureau of Economic Analysis, May 27, 2010). How fairly was this increase shared among the population? We find indications that a disproportionate share of the related income, perhaps the entire increase, may have gone to the wealthiest 20% of households.

The U.S. Census Bureau report Income, Poverty, and Health Insurance Coverage in the United States: 2008 (September 2009) shows how Americans divide their collective income. The report includes table A-3 “Selected Measures of Household Income Dispersion” beginning on page 38. In this table, we see that the share of household income of the highest-income quintile was 50% in 2008. This means that half of all income in 2008 went to one-fifth of the households. The other four-fifths of households shared the rest. This has hardly changed since 2000.

It wasn’t always this way. Table A-3 gives us data back to 1967 when the share of income going to the wealthiest fifth was 43.6%. Their share remained about 43% to 44% through 1981. Over the five-year period to 1987 (Reagan), the share gradually increased to 46% and it remained at about 46% to 47% through 1992 (Bush). The share dramatically leaped to 49% in 1993 and eased upward to 2000 (Clinton). It breached 50% in 2001 and remained a little above or a little below 50% through 2008 (Bush), the date of the latest data.

We noted on June 2, 2010 that levels of incomes since 1988 have hardly changed for most people in the U.S.