Income Inequality Is Increasing and the Poor Are Benefiting

Ryan Lau | @agorisms

In 2017, the top 1% of Americans earned a record amount of money. That year, the average income of someone in the 99th percentile was a whopping $492,311. As a result, income inequality has come into the fray as a major point of discussion in recent years. Specifically, Bernie Sanders has focused on it heavily, arguing that the divide is too great. Many others disagree. One fact, however, complicates the income inequality debate: as the rich are getting richer, so are the poor.

Without a doubt, income inequality is increasing in the United States. However, it does not follow that the poor are getting poorer. Though a 2018 CNBC article made this claim, it did not back it up sufficiently. In fact, there was not a single piece of data that analyzed the income of the bottom 99% that would either prove or disprove the statement. Looking at the data, it appears that in reality, the opposite is true.

Income Inequality: The Poor Are Getting Richer

Recent data from the Economic Policy Institute analyzed wages by income class. It compared the classes against each other and against their own previous figures. The results revealed that in reality, while the top 1% had made gains, so had the bottom 90% and 99%. The below EPI graph outlines the results of the study:

Real Wage by Income Class
Real wage by income class, 1979-2017

Results of the study are clear. Though the gains were much more significant for higher classes, all saw benefits. The study measured real wage, which means it accounts for inflation. Thus, all figures below are in 2017 dollars, which eliminates the possibility of misrepresentative data. Over the past 4 decades, America’s bottom 90% has seen a 22.2% increase in the amount of money in 2017 dollars that they have; though income inequality is increasing, in no way does this represent any American class getting poorer over time.

Interestingly, the top class saw the greatest positive and negative movement in their income. In the recession of the late 2000s, for example, the richest Americans incurred the greatest losses. Other classes, on the other hand, saw little to no change.

The Rich Are Getting More Numerous

The across-the-board increase in wealth and income inequality is also helping more Americans reach notable income levels. Once more in 2017 dollars, the EPI analyzed what the cutoff is for being in the top 10%, 5%, 1%, and 0.1%. For each of them, the number significantly increased over the 38-year period.

Annual wages by income group, 1979-2017
Annual wages by income group, 1979-2017

In just 38 years, the results are astonishing; a couple of data points particularly call the eye. In 1979, the 95-99% group made an average of $115,245 in 2017 dollars. By 2017, the 90-95% bracket was up to a $118,400 average income. This means that in fewer than 40 years, the number of Americans making more than $115,245 a year more than doubled: a sign of strong growth.

The same pattern occurs for the top 5% and top 1%. In 1979, the top 1% earned an average of $279,336 a year, but just 38 years later, the top 5% was earning considerably more than this, just a hair shy of $300,000. Over this span, therefore, the number of Americans living at this level increased fivefold. The data clearly proves that income inequality is increasing the number of wealthy Americans while also benefiting the poorest 90% of us. The poor are not getting poorer; they are getting richer.

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