The Truth About Income Inequality
from Center of the American Experiment
By John H. Hinderaker Scott W. Johnson, December 1, 1995
Data generated by the Census Bureau, the Bureau of Labor Statistics, the Federal Reserve and other nonpartisan sources refute claims commonly made by the left. For example, data from such agencies show that:
- Differences in family income largely reflect differences in how many members of a family actually work — and how hard they work.
- Income is about as widely distributed today as at any time in American history, and income is nowhere nearly as concentrated among top earners as it was in the period before World War II.
- Americans in all income groups have prospered, or have failed to prosper, together. Gains by upper-income Americans have not come at the expense of middle- or lower-income Americans. Nor has anyone else gained in those periods when higher-income families have lost ground.
- The best era in recent history for middle-income and lower-income American families was the Reagan boom, which lasted from 1982 to 1989. During that period, middle-class families saw their real incomes grow by an average of 12.6 percent, while lowest-quintile families saw an average increase in real earnings of 12.9 percent.
- There is a remarkable degree of income mobility in the American economy. Today’s “poor” are tomorrow’s “rich,” and vice versa. To a considerable extent, income distribution reflects obvious demographic factors. For example, workers in their prime earning years generally make much more money than those who are starting out in life or are retired.
Basic economic data do not support the gloomy picture promoted by the left. Moreover, the data show that the last 25 years do not represent an undifferentiated upward or downward trend for middle- and lower-income Americans. The Carter years, for example, were an economic disaster; the Reagan years were a bonanza; and the years since have been characterized by stagnation and downward drift.
The data certainly do not suggest that higher taxes, increased government spending, or hyper-regulation of the economy will benefit middle-income or lower-income citizens.