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Income Gap: Is it Widening?

Thu Sep 15 2011
Written by: David Johnson
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Economists study closely the issue of income inequality in our nation; that is, the income gap between the wealthiest and least wealthy Americans.

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The Census Bureau publishes several measures of income inequality every year. The two principal measures used are the share of aggregate household income received by quintiles (Quintiles mean the wealthiest 20 percent, the next wealthiest 20 percent, and so forth), and the Gini Index.

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We found that, based on the quintile measure, income inequality increased between 2009 and 2010. In 2010, the bottom 20 percent of households received 3.3 percent of total income, down from 3.4 percent in 2009. These households had incomes of $20,000 or less in 2010. There was also a decrease in the second lowest quintile from 8.6 percent to 8.5 percent.

Toward the other end of the continuum, those in the next-to-top 20 percent (fourth quintile) received 23.4 percent of income in 2010, up from 23.2 percent in 2009. These households had incomes between $61,736 and $100,065. Those in the very top 20 percent, meanwhile, controlled about half the nation’s income, not statistically different from 2009. These households had incomes of $100,066 or more. About 23.7 million households fall into each quintile.

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The other measure is the Gini index, which stood at 0.469 in 2010. The Gini indicates higher inequality as the index approaches one. In other words, if the index was one, it would mean a single household in the U.S. had all the country’s income. Conversely, an index of zero would signal perfect equality, in which all the nation’s households had the exact same amount of income.

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Between 2009 and 2010, the change in the Gini index was not statistically significant. Since 1993, however, the earliest year for which comparable measures of income inequality are available, the Gini index is up 3.3 percent, which means inequality has increased somewhat over the long term.

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