Monday, August 26, 2013

Income Inequality in the United States

Income inequality in the United States has increased markedly since 1980, due in large part to tremendous increases in the incomes of the highest earners and stagnation or decline in the earnings of the lowest earners. By 2007, the share of the income held by the top 1 percent was higher than it had been since 1917 (Morris and Western 1999; McCall and Percheski 2010).

Just Another Protest

By 2011, the United States was one of the most unequal among all advanced economies, with a Gini coefficient of 47.7. The Gini coefficient is a measure from 1 to 100, with 0 representing perfect equality and 100 representing perfect inequality (ILO 2013). The United States is now one of the most unequal countries in the Western Hemisphere. For example, in 2012, the richest 20 percent of people in the United States earned 16 times more than the poorest 20 percent. This is less than Brazil – where the richest 20 percent earns 21.4 times as much as the poorest 20 percent, but more than Mexico and nine other Latin American countries.

Inequality along racial lines

Overall inequality is exacerbated by inequality along racial and ethnic lines. In the United States today, Asians have the highest average earnings, followed by Whites, and then Blacks and Hispanics.

Median Weekly Earnings by Race and Ethnicity, July 2013
Asians $973
Whites $799
Blacks $634
Hispanics $572

Earnings inequality is compounded by unemployment rates. The earnings data is only based on employed people. Unemployed people may not be bringing home any income. In July 2013, 13.4 percent of blacks were unemployed, as compared to 6.8 percent of whites. The Asian unemployment rate was 5.7 percent. It was 9.5 percent for Hispanics. Since 1970, the unemployment rate for blacks has been about twice the unemployment rate for whites.

Inequality, race, and gender

When we also take gender into account, the largest income difference is between Asian men – who earned an average of $1092 per week in 2013, and Hispanic women – who earned an average of $525 per week. Notably, the gender ratio between Asian men and women is also the largest, with Asian men earning 40 percent more than Asian women.

Black, white, and Latina women have different labor market outcomes, and these vary further by level of education. Among high-school graduates aged 18 to 24, 61 percent of white women are employed, as compared to 52 percent of blacks and 55 percent of Hispanics. The trends are distinct for college graduates: 86 percent of black female college graduates are employed, as compared to 82 percent of white female college graduates and 77 percent of Hispanic female college graduates. Overall, black female college graduates are less disadvantaged relative to their white counterparts than are low-skilled black women.

These disparities continue over time. For example, when unskilled women first enter the labor market, the average hourly rate (in 1995 dollars) is $6.28 for black women, $6.67 for Hispanic women, and $6.42 for white women. However, by the 14th year on the labor market, white and Hispanic women are doing, on average, a lot better, with an average pay of $10.04 and $9.34 per hour. In contrast, even after 14 years out of school, unskilled black women earn on average $7.48 per hour. These data show that the human capital advantage of work experience is less for black women than it is for white and Hispanic women, even though black women with college degrees experience other labor market advantages (Alon and Haberfield 2007).

Given the tremendous diversity within the Latino and Asian populations, it can be helpful to break these groups down by national origin. In a study using 2000 Census data, Emily Greenman and Yu Xie (2008) looked at full-time, full-year workers between the ages of 25 and 55. They found that, when you look at men, four groups had higher earnings than white men: Chinese, Asian Indians, Koreans, and Japanese. However, when you look just at women, in addition to those four groups, Cuban women and Filipina women also out-earn their white counterparts. Overall, they found that white women earn 71 cents for each dollar that white men earn – and that white women had the largest gender disadvantage of all of the other racial and ethnic groups. Korean women, for example, earned 86 cents for each dollar that Korean men earned and Black and Filipina women earned 84 cents for each dollar that their male counterparts earned. Their results show that it is not the case that race and gender are additive factors in the labor market. Instead, racism and sexism operate in distinct ways for different ethnic and racial groups.

No matter how you slice it, there is a lot of inequality in the United States. With rising overall inequality, it is becoming increasingly clear that racial and gender justice will require also tackling overall inequality. Even if the 1 percent were racially diverse, we would still have too many poor people of color in this country, simply because of how severe income inequality is.