Behind the Data: Continuing Trend Towards Income Inequality Calls for Action

The NYT headline read in part “…Incomes Remain Stagnant..” and that, in fact, is true: Median household income barely budged between 2013 and 2014, according to survey data released Wednesday by the U.S. Census Bureau.

As shown in the graph below (red line) this reflects a broader trend in which median incomes have been flat to declining for more than a decade.

fredgraph

Source: Federal Reserve Bank of St. Louis, FRED economic data

How is that possible, TDV asked itself, if the overall economy, which is broadly reflective of total income, has been growing, albeit at an anemic rate averaging just over 2% since 2010?

The answer: a continuing trend towards income inequality

The graph above illustrates the point. Average per capita GDP is growing (top line), while median household incomes are flat to declining.  In other words, the incomes of the wealthy are increasing, while those in the middle to the bottom of the income distribution curve – the middle class and the poor – have seen their incomes stagnate.

So what do you do about it?

In addition to a long overdue increase in the minimum wage, this country needs to fix it regressive tax policies which is a major factor contributing to income inequality in the U.S. 

For additional discussion on regressive tax policies in the U.S., see the TDV blog Democrats Need to Stand Up to Special Interests and Reform Regressive Tax Policies.