US Income Inequality Through The Prism Of Different Studies

Studies of income inequality use different measures of income, and unsurprisingly, reach some different results. Steven J. Rose lays out some differences in the major studies looking at changes in inequality of US income since 1979 in "How Different Studies Measure Income Inequality in the US,"just by the Urban Institute (December 2018).

This table gives a sense of some of the issues involved. The question is seemingly a straightforward one: that is, what is the median income growth from 1979 to 2014. But the answers range from -8% to +51%.

Why do the answers vary? The rest of the table gives some clues. Most of these studies rely on data from the Current Population Survey from the US Census Bureau, but some rely on data from income tax returns. The indexes used to adjust for inflation are different. The definition of income can be before-taxes and before-transfers, or after-taxes and after-transfers. A value can be placed on non-income government benefits, like the value of Medicaid and Medicare, or not. A value can be included for employer-paid benefits, or not. Income can be defined broadly as including gains in home values in a given year, or more narrowly focused on income directly received in a given year. The figures can be adjusted for the number of people per household, or not.

These kinds of issues will matter for measures of inequality, too. For example, consider the question of what share of total income went to the top 1% of households in 1979 and 2014. Here's a table from Rose:

(Click on image to enlarge)

Using the method of Piketty and Saez (2003), share of income going to the top 1% rose by 11.9 percentage points. Using the 2018 method of those two authors, together with Zucman, the share of income going to top 1% rose by roughly half as much--similar to the projections of the Congressional Budget Office.

But some studies use methods which suggest the share going to the top 1% has risen by much less. Here's how Rose describes the different methodological choices made by the Auten and Splinter study shown here:

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Gary Anderson 1 year ago Contributor's comment

The only thing that matters is from 2000 to 2018. That is where things changed drastically.