Chart of the Day: U.S. Income Growth 1979-2007

Since everyone is talking about increased wealth and income disparities in the US, it is useful to have some numbers to point to. You saw yesterday’s chart of the day on income as measured by 2008 tax returns. Today’s chart of the day comes from the US Congressional Budget Office (hat tip Mark Thoma).

I like the fact that a man named Edward Harris prepared the data. Go Edward!

The CBO writes:

From 1979 to 2007, real (inflation-adjusted) average household income, measured after government transfers and federal taxes, grew by 62 percent. That growth was not equal across the income distribution: Income after government transfers and federal taxes (denoted as after-tax income) for households at the higher end of the income scale rose much more rapidly than income for households in the middle and at the lower end of the income scale.

In a study prepared at the request of the Chairman and former Ranking Member of the Senate Committee on Finance, CBO examines the trends in the distribution of household income between 1979 and 2007. (Those endpoints allow comparisons between periods of similar overall economic activity.)

After-Tax Income Grew More for the Highest-Income Households

CBO finds that between 1979 and 2007:

  • For the 1 percent of the population with the highest income, average real after-tax household income grew by 275 percent (see figure below).
  • For others in the 20 percent of the population with the highest income, average real after-tax household income grew by 65 percent.
  • For the 60 percent of the population in the middle of the income scale, the growth in average real after-tax household income was just under 40 percent.
  • For the 20 percent of the population with the lowest income, the growth in average real after-tax household income was about 18 percent.

[…]

Market Income Shifted Toward Higher-Income Households

The major reason for the growing unevenness in the distribution of after-tax income was an increase in the concentration of market income—income measured before government transfers and taxes—in favor of higher-income households. Specifically, over the 1979 to 2007 period, the highest income quintile’s share of market income increased from 50 percent to 60 percent (see figure below), while the share of market income for every other quintile declined. In fact, the distribution of market income became more unequal almost continuously between 1979 and 2007 except during the recessions in 1990–1991 and 2001.

Source: Trends in the Distribution of Income – Directors Blog, Congressional Budget Office

This post originally appeared at Credit Writedowns and is reproduced with permission.