Some Interesting Data on Income Inequality

These days we have a lot of coverage of increasing income inequality in the US. I have been following the inequality debate pretty closely and at least from the media coverage one would be led to believe that income inequality has increased dramatically over the last 10-20 years. Today I came across some data which frankly surprised me and I thought I would share it here.

One of the most commonly used measure of income inequality is called the Gini coefficient. It is a measure of inequality which ranges from 0 to 1. 0 means perfect equality and 1 means one person earns all the income. Here are some more details on the calculation of Gini.

The following is the Gini data for the US from 1967 to 2007

Here is what surprised me about this data

1. The increase in Gini from 1993 to 2007 is a lot lower than I was expecting. Especially considering the media coverage I would have expected a larger increase. Gini is not a logarithmic indicator so a rise from 45.5 to 47 is not a big jump.

2. The thing which surprised me the most was that even in the late 60s the US was pretty unequal. To put it in perspective the US in the late 60s(Gini -39) was still more unequal than the UK of today(Gini of 34), Canada(32) and a lot more unequal than most western European countries of today(below 30 in most of them). After reading the work of some liberal authors I was under the impression that the US was a lot more equal in the 60s. So it does appear that the US has been a pretty unequal country for most of its history and even supposedly the golden 50s and 60s were not that equal.

In conclusion, we are clearly near the peak of inequality over the last 50 years, but it appears the jump as measured by the Gini index has not be that dramatic over the last 15-20 years as most media portrays it.

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