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