The Generation-Long Trend Towards Ever-Greater Income Inequality Continues

Today’s release of data on family income from the Census Bureau reinforces the fact that the generation-long trend towards ever-greater income inequality seems to be firmly underway again, after only the briefest interruption caused by the Great Recession.

Several economic commentators noted the decline in income inequality (mostly driven by steep but temporary falls in income at the very top of the distribution) that accompanied the aftermath of both the early 2000s recession and the Great Recession, some even going so far as to suggest that the recessions had somehow solved the problem of rising income inequality. Yet the evidence is clear that this isn’t the case—recessions seem to only suspend the growth of inequality temporarily. This, of course, should not be a shock—declines at the top of the income distribution are driven largely by stock market movements, and the steep stock market declines of the early 2000s and 2008 bottomed out quickly, and stock prices rose relatively quickly thereafter.

Figure 1 below shows the long-run rise in family income inequality. It tracks growth in average family income by various income groupings since 1947. A key feature of this figure is the extraordinarily tight distribution of income growth from 1947 to 1979 (all lines move upward in a tight bunch), and the rapid pulling apart of income growth thereafter (the lines start pulling apart from each other).

In the earlier period, each income group below the 95th percentile saw average annual gains between 2.2 and 2.5 percent. The top 5 percent saw average annual gains just below this, at 1.9 percent. Between 1979 and 2007 (the last pre-Great Recession year), these average annual gains ranged from 1.7 percent (for the top 5 percent) to zero for the bottom fifth of families. And looking at the far right of the graph one can see that incomes for the bottom fell during the Great Recession and continued falling through 2012.

Figure 1

Family income growth, by income group, 1947–2013

Lowest fifth Second fifth Middle fifth Fourth fifth 80th-95th percentile Top 5 percent
Jan-1947 44.90171% 49.748 47.10831 46.48166 47.37905 55.46682
Jan-1948 42.15241 48.45599 45.92278 44.7189 45.02981 51.91882
Jan-1949 38.11019 46.91496 45.20958 44.59367 45.20657 50.51469
Jan-1950 40.22991 49.94058 48.00003 46.87369 46.98113 54.58646
Jan-1951 45.54955 52.58617 49.47462 47.76466 46.74326 54.01641
Jan-1952 46.54273 54.3872 50.99889 49.80218 48.14765 58.33207
Jan-1953 46.78402 57.92226 55.28762 53.30578 51.89834 55.15713
Jan-1954 44.25233 55.39171 53.70969 52.66211 51.88204 56.57357
Jan-1955 50.19058 59.87174 57.43237 55.52724 53.86834 60.52394
Jan-1956 55.44759 64.52953 61.25217 58.88949 57.13014 63.01456
Jan-1957 55.79062 64.67412 61.09777 58.33708 56.13012 60.23071
Jan-1958 54.37464 63.28083 60.40245 58.23727 56.69962 59.10843
Jan-1959 56.82935 66.40756 64.05977 61.84866 60.46867 65.08428
Jan-1960 57.02791 67.47483 65.25622 63.89018 62.43572 66.67233
Jan-1961 57.44564 67.70831 66.00138 65.17978 64.73698 71.60934
Jan-1962 62.366 70.25853 67.74017 67.0758 66.06495 69.11621
Jan-1963 64.57755 72.74995 70.54082 69.45436 67.87323 72.02296
Jan-1964 68.15957 74.65754 72.99374 71.8695 69.95688 74.99911
Jan-1965 71.82375 78.44411 75.86483 73.96723 72.58581 75.56119
Jan-1966 81.94505 84.46799 80.37305 78.03481 75.38541 80.56783
Jan-1967 80.35971 84.51624 80.35971 78.35905 76.9729 86.1372
Jan-1968 88.16421 90.87863 85.9871 83.60445 81.10673 86.68246
Jan-1969 92.27276 95.11367 89.99418 87.5005 85.2273 90.72195
Jan-1970 89.12931 93.73945 89.63862 88.01982 86.39738 90.87695
Jan-1971 90.72473 92.14674 89.58419 87.96637 86.6862 91.40395
Jan-1972 95.99095 96.68305 94.24566 93.46354 92.07909 97.94157
Jan-1973 97.42732 98.12977 95.65591 95.259 93.82342 96.90632
Jan-1974 99.16739 97.18764 94.4849 93.94805 92.86819 90.87786
Jan-1975 95.08008 94.05552 92.73219 92.0648 90.63052 89.28739
Jan-1976 97.61934 96.5674 95.20874 94.52352 93.05094 91.67194
Jan-1977 97.55751 96.60946 96.33107 96.57862 95.41675 93.27958
Jan-1978 98.6531 99.50356 99.21683 99.06245 98.27512 97.36351
Jan-1979 100 100 100 100 100 100
Jan-1980 94.90448 96.69513 97.24768 97.89881 98.17705 92.27117
Jan-1981 93.39238 93.5139 95.1545 97.12866 97.70654 89.55718
Jan-1982 88.08611 92.67267 93.50215 96.31723 98.04896 95.133
Jan-1983 86.55976 92.103 93.75709 96.97567 99.04727 95.39239
Jan-1984 88.32512 95.08275 97.09454 101.015 103.1729 100.0152
Jan-1985 90.59641 96.64918 98.42652 102.7668 105.4355 107.2502
Jan-1986 92.36824 99.7211 102.4866 106.1252 109.3781 114.4488
Jan-1987 92.35603 100.0062 104.0812 107.9681 110.4949 121.8816
Jan-1988 93.25081 100.9751 104.4641 109.0141 112.4043 123.0625
Jan-1989 96.10433 103.0924 106.3714 110.9456 115.4116 131.9898
Jan-1990 94.06931 102.8134 104.75 109.0546 113.814 125.5861
Jan-1991 90.05717 99.68398 102.5108 108.0686 112.2092 120.7826
Jan-1992 85.83683 97.57314 101.6354 107.3478 111.9252 123.9996
Jan-1993 85.28795 95.86825 100.7765 108.6017 114.9128 149.0398
Jan-1994 89.38081 99.0674 103.098 111.1035 118.0003 150.971
Jan-1995 95.16571 101.6916 105.4486 112.4327 118.5842 152.6723
Jan-1996 92.48728 102.5105 107.3607 113.9781 120.7346 157.7724
Jan-1997 95.97216 105.3094 110.7009 117.7607 125.2839 166.9432
Jan-1998 99.12045 108.7639 114.3324 121.6238 129.882 172.4196
Jan-1999 104.3748 111.866 116.8443 125.0927 135.093 173.9104
Jan-2000 106.1654 112.6358 117.3252 125.5791 135.8781 183.8652
Jan-2001 102.5363 110.2392 116.0125 125.2681 134.863 180.9464
Jan-2002 101.0678 108.6603 115.0935 124.0132 133.4294 176.6563
Jan-2003 98.80183 107.6932 115.2573 125.2696 135.115 174.3562
Jan-2004 96.355 107.6518 114.4697 124.142 134.5647 177.69
Jan-2005 97.09031 108.4733 114.5943 124.5455 135.5916 180.7593
Jan-2006 99.15195 109.6227 115.4979 127.1901 138.4708 188.0971
Jan-2007 100.7828 110.9968 118.3268 128.3321 138.3327 174.3818
Jan-2008 95.63405 106.8463 114.351 123.7489 135.0419 172.9851
Jan-2009 92.35756 103.9371 111.4101 122.8395 134.959 172.8415
Jan-2010 88.75148 102.0745 110.1884 121.9349 133.4953 163.533
Jan-2011 88.47356 100.7972 108.4832 119.9871 132.9512 175.0297
Jan-2012 87.57781 100.0822 108.5207 120.4465 133.3512 175.0376
Jan-2013  89.30241  101.7415  109.4995 121.1112  134.1967  175.8400
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Note: Shaded areas denote recessions.

Source: EPI analysis of Current Population Survey Annual Social and Economic Supplement family income data

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Figure 2 below highlights how slow and uneven income growth has been since 2000, showing the change in income for groups during the full business cycle that preceded the Great Recession, as well as income changes since 2007 (the last year before the Great Recession).

Figure 2

Average annual family income growth, by income group, 2000–2007 and 2007–2013

2000–2007 2007–2013
Lowest fifth -0.7% -2.4
Second fifth -0.2 -1.7
Middle fifth 0.1 -1.5
Fourth fifth 0.3 -1.2
80th-95th percentile 0.3 -0.6
Top 5 percent 0.4 -1.3
ChartData Download data

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Source: EPI analysis of Current Population Survey Annual Social and Economic Supplement family income data

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The upshot of this figure is clear: income growth for the vast majority of families was either outright negative or anemic (i.e., 0.3 percent annually or less) even in the last full business cycle preceding the Great Recession. And it got worse from there, with the bottom 60 percent of the family income distribution seeing average annual incomes losses of between 1.5 percent and 2.4 percent since 2007.

A final way to demonstrate the deeply unequal fortunes of American families in recovering from recent recessions, including the Great Recession, is to examine the progress each income grouping has made in regaining their peak income level. Figure 3 shows the share of each income group’s 2013 income as a share of the highest income level they have achieved (as well as reporting when that previous peak occurred).

Figure 3

Average 2013 family income, by income group, as a share of peak income

Share of peak income
Lowest fifth 84.1%
Second fifth 90.3%
Middle fifth 92.5%
Fourth fifth 94.4%
80th-95th percentile 96.9%
Top 5 percent 93.5%
ChartData Download data

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Source: EPI analysis of Current Population Survey Annual Social and Economic Supplement family income data

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By 2013, average incomes for the bottom-fifth of families had only regained 84.1 percent of their previous income peak (which reached was 13 years earlier, in 2000). Average incomes for the second-fifth of families in 2013 incomes were 90.3 percent of their previous peak, reached also in 2000. Average incomes for the middle-fifth in 2013 had only reached 92.5 percent of their previous income peak, reached also in 2000. Meanwhile, average incomes for families in the fourth-fifth hit 94.4 percent of their previous income peak in 2013, which was reached in 2007. Average incomes for families in the 80th to 95th percentiles reached 96.9 percent of their previous peak, which was seen in 2006. And average incomes for the top 5 percent of families reached 93.5 percent of their historic income peak, reached in 2006.


  • TheBrett

    They did have pretty strong growth across income quintiles in the late 1990s, including the Bottom 20%. The Top 5% grew much faster than all the rest, but they all did grow.