An obvious point rarely made about income inequality

We’ve heard a lot over the past four years about income inequality. The unequal distribution of wealth, and efforts to redistribute it more “fairly,” arguably have been the chief animating concerns of the Obama presidency, from tax laws to social-welfare policies.

With that in mind, I recommend the latest post by economist and blogger Mark J. Perry, who simply compiled census data to show what we know about the characteristics of U.S. household income. There’s a complete chart and fuller discussion of the data in his post, some of which echoes points I’ve made in the past about the correlation between marriage rates and poverty. I recommend reading the whole thing.

But in this space I want to touch on two other points he makes that ought to be blindingly intuitive, but aren’t always mentioned amid the heated rhetoric:

On average, there are significantly more income earners per household in the top income quintile households (2.03) than earners per household in the lowest-income households (0.44). It can also be seen that the average number of earners increases for each higher income quintile, demonstrating that one of the main factors in explaining differences in income among U.S. households is the number of earners per household. …

Almost 62 percent of U.S. households in the bottom fifth of Americans by income had no earners for the entire year in 2011. In contrast, fewer than 3 percent of the households in the top fifth had no earners in 2011, providing more evidence of the strong relationship between household income and income earners per household.

Simply put, the more people working in a given household, the higher its income is likely to be. This is probably the chief reason marriage rates matter when it comes to poverty. Education also matters, as do other factors Perry discusses in his post.

How influential is this factor? Here’s one simple, somewhat crude, but illustrative way to look at the data:

The average income in the top quintile is almost 16 times higher than that of the lowest quintile ($178,020 vs. $11,239). But when we take each group’s average income and divide it by its number of earners, the average earner in the top quintile makes only 3.4 times as much as the average earner in the bottom quintile ($87,695 vs. $25,543). Given that a person in the top quintile is more than 5 times as likely as a person in the bottom group to have a college degree (62.3 percent vs. 12.1 percent), that difference doesn’t seem unreasonable.

In fact, let’s go one step further. If you take the average earner’s income in the top and bottom groups (again, $87,695 vs. $25,543) but flipped the average number of earners for each, the average income in the bottom quintile would be $51,853 — and the average income in the top quintile would be just $38,586. That’s right: The two groups would trade places (actually, the second-lowest quintile would have the highest average income in that scenario).

Should anyone be surprised that having more workers means a household has more money? So why is this almost never part of the discussion about income inequality? As Perry points out: If demographics explain much of the inequality, then “because the key income-determining demographic variables change over a person’s life, so does income mobility.” And mobility is really the key when it comes to assessing inequality.

– By Kyle Wingfield

Find me on Facebook or follow me on Twitter

154 comments Add your comment

Aesop's Fables and other Lib Economic Theories

January 8th, 2013
12:06 pm

The words Equality and Justice are dog whistles for the weak minded.

Responsibility, Effort and Achievement all illicit an opposite response from them.

Puck

January 8th, 2013
12:11 pm

I see Kyle ignored the lack of quality low cost child care in his article. It is kind of pointless for a low end wage earner to get a job when most of the earnings go to providing for child care. Cue the “don’t have kids if you can’t afford them” response in 3 .. 2 .. 1.

Dunwoody Granny

January 8th, 2013
12:14 pm

Ah. when you put it that way, it’s really simple!

So all that anyone needs to do to be in the top quintile is go to college, marry someone who went to college, and get a job!

Boy, all those marrried college grads who lost their jobs a few years ago and have looked and looked and finally taken retail and fast food jobs to put food on the table will certainly be chagrined when they find out how easily they could be earning $87K each.

I’m a little chagrined, too. Even though I’m unmarried, I’m a college grad and have been working for more than 30 years but still don’t make $87K.

Skip

January 8th, 2013
12:17 pm

I guess that explains why the wife makes $10.000 a year less than ten years ago doing the same thing.

td

January 8th, 2013
12:17 pm

I have been saying this now for a couple years on these blogs that the poverty problem is mostly due to single income families and no one wants to address this problem. If you have a single mom making $7.25 per hour with two children the you have poverty. If you have a mom and dad in a home with each making $7.25 per hour then to do not have a poverty problem.

The minimum wage example on compounds itself when you think about the fact that almost all people never receive just the minimum wage and when you consider education. Top pay for an individual is around between $10 to $15 per hour so a household of a single uneducated parent could NEVER reach the level of two parents making top pay.

F. Sinkwich

January 8th, 2013
12:24 pm

“Simply put, the more people working in a given household, the higher its income is likely to be. This is probably the chief reason marriage rates matter when it comes to poverty.”

They certainly do, Kyle. But anytime someone brings up that fact, one or more lib ilks scream racism, refuse to acknowledge the problem, then blame “the man,” whoever that is. Their answer?

Raise taxes on the rich, as though that fixes everything.

td

January 8th, 2013
12:25 pm

Dunwoody Granny

January 8th, 2013
12:14 pm

Those married college grads that were laid off several years ago quickly found jobs. Unemployment rate for college grad is 3.9% vs a non HS grad is 11.7%

http://www.bls.gov/news.release/empsit.t04.htm

td

January 8th, 2013
12:26 pm

Skip

January 8th, 2013
12:17 pm

I guess that explains why the wife makes $10.000 a year less than ten years ago doing the same thing.

And what field does your wife work in? What is her college degree in?

MANGLER

January 8th, 2013
12:28 pm

Yes, in a perfect GOP world, everyone comes from enough money and the type of household where you just go off to college, and can graduate, start a budding career, then meets someone and gets married, and then has kids who then can repeat the scenario. That’s a nice Disney World view of things.
However, in reality, life happens and it does not provide a level playing field for everyone. If you start off poor, the world doesn’t make silly little things like college, climbing a career ladder, or family planning very easy for you (I didn’t say impossible, just not as easy).
I’m not in any way saying that well to do or wealthy people are bad people and they do not work hard (and I hate this new anti wealthy sentiment that has taken over lately), I’m just suggesting that when someone has means or comes from means, they don’t feel all the kicks in the rear that life doles out.

Scott Fresno

January 8th, 2013
12:28 pm

Let’s bring back shotgun marriages and make divorce illegal.

SBinF

January 8th, 2013
12:28 pm

Kyle, you’re on to something. If only people would get married, then our problems would be fixed!

Dunwoody Granny

January 8th, 2013
12:30 pm

td

I understand the statistics, but those statistics don’t square with the people I know (admittedly an older crowd). Some did find jobs, but most are now significantly underemployed. Others found ways to leave the labor market (disability, under-the-table work, etc) and simply aren’t counted in the statistics.

joe

January 8th, 2013
12:31 pm

“Somebody’s got to pay…for all these children and all our suffering.” — mother of 16 kids with no male figure in the house.

xxx

January 8th, 2013
12:32 pm

Puck,

Unlike other commhodities that aen produced cheaper by substituiting ingredients or modifying processes, child care, regulated by the state, cost what it cost. The income of the parents of the child do not influence the minimum cost required to meet the state guidelines. So the myth of low cost child care is a favorite whipping boy but really what is meant is subsidized child care. You want someone else to pay the difference.

Aesop's Fables and other Lib Economic Theories

January 8th, 2013
12:34 pm

When will gay marriage worm it’s way into this discussion?

Rafe Hollister preparing for an Obamanist America

January 8th, 2013
12:34 pm

Statistics, only please the side that agrees with them, the other side argues their validity.

People are born different, (duh!) some are motivated to live life to excess, with their Ferrari’s and penthouses, others are only interested in raising their children in a safe environment, and some only in having a good time and living for today. We got off track when we as a society decided that we were so intellectual and compassionate that we knew, what was best for everyone. Short of collecting all the money and redistributing it equally there is no way the Gov can insure that financial equality. As is often said, if that happened, within 2 months the motivated would have most of the money again.

As my grandfather used to say, happy people are that way, because they choose to be happy. Successful people are successful because they choose to be. Every effort we make to control peoples lives fails, but we keep trying. The Left in America loves to control things to insure fairness, equality, standard of living, and security. The Right tries to control things to make people do what they think is right. Neither side seems to be accomplishing their goals and it is time to give up and let people do as they please, unless they endanger other citizens or property.

We need to spend our efforts teaching the children that the choices they make are permanent, you get no mulligans or do overs in life, so choose wisely.

Lil' Barry Bailout - OBAMAPHONE!!!

January 8th, 2013
12:39 pm

Just as I’ve always thought. The main cause of low income is not working.

Get a job, Democrats.

East Cobb RINO, Inc (LLC)

January 8th, 2013
12:42 pm

So all the poor low wage earners should just live in 1 apartment? Oh wait never mind, this thread is not about immigration.

Lil' Barry Bailout - OBAMAPHONE!!!

January 8th, 2013
12:43 pm

SBinF: Kyle, you’re on to something. If only people would act responsibly, then our problems would be fixed!
——–

Fixed.

Kyle Wingfield

January 8th, 2013
12:44 pm

Dunwoody Granny @ 12:14: Each quintile has almost 23 million households. Of course there will be exceptions when we are talking about averages within groups that large. And, as should be clear from the fact that I wrote 12.1 percent of those in the lowest-income households have college degrees, a college degree is not a guarantee of anything.

All that said, I do think these numbers describe some important factors that are often lost or ignored in the rush by some people to blame inequality on greedy CEOs and others who have “made enough money.”

Darwin

January 8th, 2013
12:45 pm

But I guess since the right wing opposes both birth control and abortion, continuing the poverty life for single women who get pregnant is acceptable?

SBinF

January 8th, 2013
12:45 pm

“If only people would act responsibly, then our problems would be fixed!”

Good heavens, and if wishes were peppermints, I’d have the biggest candy store this side of the Mississippi.

You can continue to hope that people will act responsibly. I’ll continue to stay here in reality.

Kyle Wingfield

January 8th, 2013
12:46 pm

Aesop @ 12:06: If it’s a dog whistle for the weak-minded, how did you hear it?

Just teasing. But I am always amazed at how many of these “dog whistles” are audible to people outside their intended audience. (Maybe because “dog whistle” is a lousy metaphor…)

Politico

January 8th, 2013
12:50 pm

Aesop @ 12:43

Appears it did when you brought it up.

Aesop's Fables and other Lib Economic Theories

January 8th, 2013
12:51 pm

Kyle – Did you see what they are printing on the first class postage stamp nowadays? One says “Justice” and the other says “Equality.” I guess this made somebody feel like they were fulfilling their duty at one of the most failed government institutions there is.

Scooter

January 8th, 2013
12:51 pm

Unfortunately politicians promote their job security by legislatively addressing symptoms rather than illnesses. Legislating America toward the lowest common denominator.

Lil' Barry Bailout - OBAMAPHONE!!!

January 8th, 2013
12:53 pm

Darwin: continuing the poverty life for single women who get pregnant is acceptable?
———-

Why do folks who can’t afford a child get pregnant?

Irresponsibility.

Kyle Wingfield

January 8th, 2013
12:53 pm

Darwin @ 12:45: The “right wing” does not oppose birth control. But nice job keeping a recent campaign lie alive.

td

January 8th, 2013
12:59 pm

Darwin

January 8th, 2013
12:45 pm

But I guess since the right wing opposes both birth control and abortion, continuing the poverty life for single women who get pregnant is acceptable?

Conservatives do not oppose birth control. If you understand that being single and having a child results in poverty then why are you having unprotected sex outside of marriage?

guest

January 8th, 2013
1:08 pm

td,

Personal responsibility is a foreign concept to liberals. Their motto is “my life sucks and it’s your fault”.

Dearie

January 8th, 2013
1:08 pm

Puck 12:11 pm
Ever heard “where there’s a will there is a way.” When people want to make something happen they will.
When I had young children and could not afford day care I organized a babysitting co-op. It took some effort, but the outcome was good for everyone involved. No money was exchanged, just use of your free time. If you are not able to work you have free time, but no money. Barter what you have to get what you want. Be creative. Use your head to solve your problem instead of asking others to solve them.
Question is ~ If someone else always solves your problems what incentive do you have to solve your own?

HDB

January 8th, 2013
1:11 pm

In many cases, when people decry income inequality, the focus is actually upon CEO compensation as compared to labor compensation….which in many cases…is 250 TIMES that of the lowest-paid employee. The question becomes why should one person reap greater benefits than the work force that GOT him the riches.

When that answer is better addressed, then many more would understand why the focus on income inequality exists………….

Lynnie Gal

January 8th, 2013
1:11 pm

That doesn’t explain or justify the CEO’s salaries that are now sitting at 209.4 times their workers salaries. “Income inequality between CEOs and workers has consequently exploded, with CEOs last year earning 209.4 times more than workers, compared to just 26.5 times more in 1978 — meaning CEOs are taking home a larger percentage of company gains.” Middle class jobs have almost disappeared. And wealthy households in this country own 288 times more than you do. It’s not just that two people are working, Kyle. But it certainly helps if you’re married to a CEO. http://money.cnn.com/2012/09/11/news/economy/wealth-net-worth/index.html
http://www.huffingtonpost.com/2012/05/02/ceo-pay-worker-pay_n_1471685.html

Bruno

January 8th, 2013
1:14 pm

Should anyone be surprised that having more workers means a household has more money? So why is this almost never part of the discussion about income inequality?

In addition to having more workers in successful households, I would bet my bottom dollar that those in the more affluent households also work more hours per week per person than in the lower tier homes. Personally, I’ve averaged 50 hours per week for nearly 40 years now with minimal vacation time. Most of my less successful friends barely put in 40 hours and take off whenever possible.

guest

January 8th, 2013
1:15 pm

HDB,

Another way of looking at it is why should the lowest-paid employee be paid as much as the person that GOT him his job in the first place. Suggesting that the lowest-paid employee and a CEO, while at the same time ignoring their job duties, education, etc, be similarly paid is pure BS.

td

January 8th, 2013
1:18 pm

Education level and children out of wedlock are the best ways to indicate level of success in this country.

Divorce rates went down during the recession because upper middle class people realized that you can not raise children with one parent. If we tightened the requirements for welfare programs then the poverty rate would decrease and the marriage rate would increase because people (i might as well say women because they control all sex) would realize that getting pregnant without a man in the house would have them at a lower standard of living instead of a higher one with all the government support.

JamVet

January 8th, 2013
1:19 pm

So why is this almost never part of the discussion about income inequality?

Because it is a canard to deflect attention away from the new American plutocracy?

But as good (self-destructive) Republicans let focus on the factors that comprise 10% of the equation and not the other 90%…

F. Sinkwich

January 8th, 2013
1:20 pm

“The question becomes why should one person reap greater benefits than the work force that GOT him the riches.”

Uh, because that “one person” works harder, is smarter, more motivated, willing to self-sacrifice, more innovative, can positively influence and lead people for the greater good of stakeholders, and stuff like that?

getalife

January 8th, 2013
1:22 pm

When the gap is too large, there is revolution.

Read history.

Lil' Barry Bailout - OBAMAPHONE!!!

January 8th, 2013
1:23 pm

“Conservatives oppose birth control”
———

I guess liberals are even dumber than we thought–they apparently don’t use birth control because someone else opposes it.

td

January 8th, 2013
1:23 pm

JamVet

January 8th, 2013
1:19 pm

So why is this almost never part of the discussion about income inequality?

Because it is a canard to deflect attention away from the new American plutocracy?

But as good (self-destructive) Republicans let focus on the factors that comprise 10% of the equation and not the other 90%…

And how many households in the bottom 50% of wage earners are headed by a single parent vs how many people in the top 50%?

JamVet

January 8th, 2013
1:30 pm

Framing the argument in terms of households instead of individual people is asinine. But a tasty red herring for those not terribly interested in intellectual honesty.

INDIVIDUALS in the “middle class” have gotten crushed for four straight decades.

As in FLAT-LINED WAGES. And this is not by accident.

And the lower class in this country?

They have gotten absolutely crushed.

To wit, the minimum wage is worth less today than it was in 1968!!!

Again, not by accident.

But it’s all good, you Reaganbots keep on licking the super-wealthy’s boots and stay patient.

Maybe in another forty years you will see some of that wealth trickle down…

Cutty

January 8th, 2013
1:33 pm

Yeah because Repubs believe that employers shouldn’t have to pay for any form birth control. Viagra, that’s acceptable. Conservatives may not be against B.C. but they sure aren’t for it either. They rather a woman balance an aspirin between their knees, or something along those lines.

td

January 8th, 2013
1:35 pm

JamVet

January 8th, 2013
1:30 pm

Framing the argument in terms of households instead of individual people is asinine. But a tasty red herring for those not terribly interested in intellectual honesty.

INDIVIDUALS in the “middle class” have gotten crushed for four straight decades.

As in FLAT-LINED WAGES. And this is not by accident.

I can not let you get away with that broad brush. Define middle class as in wages and education levels?

ByteMe - Got ilk?

January 8th, 2013
1:35 pm

The problem with “quintile” is that you push a whole bunch of dissimilar people into a large enough category and then call them all the same.

Someone making in the top 20% is not the same as someone making in the top 1%.

Someone making in the top 1% is soooo not the same as someone making in the top 0.01%.

Those are all very different circumstances. The problem isn’t that if you get a college education you could be making $87K. The problem is that we have some people earning $100 million or more each year spending their money on buying politicians to make sure they don’t have to pay as much in taxes (as a percent of income) as someone making $87K. And we’re damn sick of it.

HDB

January 8th, 2013
1:38 pm

guest
January 8th, 2013
1:15 pm

It’s not so much that the lowest-paid and CEO make comparable salaries……but when you look at the wage disparity….and add benefits…..then the question needs to be asked.

When the CEOs of Ben and Jerry’s only make 25 times their lowest-paid employee….but other CEOs make 250 TIMES their lowest-paid employee……then the question still remains.

F. Sinkwich
January 8th, 2013
1:20 pm

“The question becomes why should one person reap greater benefits than the work force that GOT him the riches.” Uh, because that “one person” works harder, is smarter, more motivated, willing to self-sacrifice, more innovative, can positively influence and lead people for the greater good of stakeholders, and stuff like that?”

Not necessarily! Note the CEO’s that basically destroy a company, reap the riches, then leave!! Hostess Bakery is a good example!! The EMPLOYEES are just as valuable stakeholders as is the financiers behind them!!

Aynie Sue

January 8th, 2013
1:39 pm

About income inequality and redistribution… the preposterous inequality in income and wealth is due to the malfunction of our free enterprise economic system; the redistribution of income through government taxation and spending is essential to economic stability and growth .

In a perfectly functioning free enterprise system there would be no billionaires, a few more millionaires, and a prosperous and expanding middle class. Any highly lucrative enterprise would soon face competitors who offer cheaper and better products and services. Alas, financial sector manipulation, patent laws, and political favoritism have perverted our free enterprise system and created corporate monstrosities like Apple, Microsoft, Walmart, and Boeing. Glance at a list of those Americans who command high income! Few are entrepreneurs or innovators; most are financial manipulators .

Redistribution of income and wealth is essential to the functioning of our imperfect economy. Glance at a list of the wealthiest Americans! Few accumulated their fortunes by honest enterprise; most have inherited their wealth or gained it through financial manipulation. Many protect their wealth by taking it out of the economy rather than investing it in the economy. Some move American capital into off-shore. Others put American capital into speculative financial instruments, like derivatives, that create no jobs. Still others invest American capital directly in foreign countries.

Money is meant to circulate. There is no such thing as my money and your money. We are all part of the economy. My money becomes someone else’s as soon as I spend it or pay taxes. Money should not rise to the top and be taken out of play. Americans deserve the opportunity to earn back some of the accumulated wealth that their spending has created. Redistribution of income and wealth through taxation corrects some of the defects in our economic system, and keeps the money flowing.

F. Sinkwich

January 8th, 2013
1:41 pm

Poor Jammie.

One might have thought that recent tax increases on those undeserving ingrates (”the rich”) would have put a smile on his face for at least a few days…

But alas, Jammie has realized that his miserable lot in life is still miserable therefore he must continue to search out those whom he believes are responsible.

Jammie should find a job, get a new hobby, or at least get therapy.

Kyle Wingfield

January 8th, 2013
1:42 pm

Lynnie Gal @ 1:11: From that CNN article: “The average wealth of the top 1% dropped just 15.6% between 2007 and 2010, while the median net worth of American households sank 47.1% That large decline in median wealth is largely responsible for driving the gap to such heights.”

What happened between 2007 and 2010? A housing crash that disproportionately affected those who had the bulk of their wealth tied up in their homes, i.e. the middle class. That’s not to say it’s unimportant or that policy makers shouldn’t be concerned about it at all. But if you wanted to make the gap appear as large as possible — say, due to some ideological motivation guiding your policy preferences — you would choose the worst comparison possible and argue for making public policy based on that comparison.

But what if we based our comparison on the pre-crash figures for 2007? The ratios in the article imply a wealth ratio of 180:1 in 2007, vs. 288:1 in 2010. That’s an enormous difference — a far greater difference than the one between 125:1 in 1983 and 180:1 in 2007. Now, the wealth at the peak of the bubble may not have been real, but neither is the reduced level of wealth in 2010 — home prices have rebounded somewhat since then and will probably continue to do so. So the real figure is somewhere between 180 and 288. Admittedly, I don’t know where. But nor do any of the sources you’ve cited attempt to account for the reasons behind these differences of wealth. Such as: Has education become more important? How have family structures changed? To what degree do such factors account for the gap being wider today than in the past?

Which brings me back to the whole point of the OP …

JamVet

January 8th, 2013
1:47 pm

Looks like Andy/I Report/Sinkwink is trying to get red carded yet again.

How many times would that make, Andy?

Which is fine by me, the man contributes next to nothing of value on these forums…

Whaddya think of this character, Kyle?

Does he serve any useful purpose?

LOL…