Monday, January 7, 2008

The Bottom 40% vs. The Top 1%

Yep, I'm still digging though the CBO data released a few weeks ago, so here's a little more on income inequality. I decided to put together a graphic which will clearly illustrate just how much income inequality has changed since 1979. Some of this I mentioned in a previous post, but I felt I needed to make a separate post to drive home this point.

In 1979, the average household from the Top 1% earned $326,000 in after-tax income. The average income for 40 average households from the bottom 40% was $870,000. In other words, 40 typical households in the bottom 40% would split $870,000 40 times for $21,700 each.

In 1979, the average Top 1% household earned 15 times more than the average Bottom 40% household. Still, when you add the total income accrued by the Bottom 40% in 1979, they earned almost three times as much as the Top 1%.

So how have things changed since then?

(Click on image for larger version)

If you read any of my previous posts, you know that income growth has skyrocketed for the Top 1%. Currently, the average after-tax income for the Top 1% is $1,071,000. That is greater than if you were to add up the average 2005 income for the Bottom 40%, which is only $980,000. And remember, that income needs to be split 40 ways, with only $24,500 going to each household in the bottom 40%. In 2005, the average Top 1% household earned nearly 45 times as much as the average bottom 40% household.

The average Bottom 40% has grown almost 13% since 1979. For the Top 1%, the average household income has grown a whopping 228%.

Income inequality was bad in 1979. It has only gotten much worse since then.

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