Demographics & Inequality: 2018 Edition

Every year, economist Mark Perry draws on Census Bureau reports to paint of picture of the demographics of inequality. Looking at 2018 data, he constructed the following table:

Once again, he concludes,

Household demographics, including the average number of earners per household and the marital status, age, and education of householders are all very highly correlated with American’s household income. Specifically, high-income households have a greater average number of income-earners than households in lower-income quintiles, and individuals in high-income households are far more likely than individuals in low-income households to be well-educated, married, working full-time, and in their prime earning years. In contrast, individuals in lower-income households are far more likely than their counterparts in higher-income households to be less-educated, working part-time, either very young (under 35 years) or very old (over 65 years), and living in single-parent or single households.

The good news about the Census Bureau is that the key demographic factors that explain differences in household income are not fixed over our lifetimes and are largely under our control (e.g., staying in school and graduating, getting and staying married, working full-time, etc.), which means that individuals and households are not destined to remain in a single income quintile forever. Fortunately, studies that track people over time find evidence of significant income mobility in America such that individuals and households move up and down the income quintiles over their lifetimes, as the key demographic variables highlighted above change, see related CD posts herehere and here. Those links highlight the research of social scientists Thomas Hirschl (Cornell) and Mark Rank (Washington University) showing that as a result of dynamic income mobility nearly 70% of Americans will be in the top income quintile for at least one year while almost one-third will be in the top quintile for ten years or more (see chart below).

What’s more, Perry points out elsewhere that the new data demonstrate that the middle class is shrinking…along with the lower class. Meanwhile, the percentage of high-income households has more than tripled since 1967:

In short, the percentage of middle and lower-income households has declined because they’ve been moving up.

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