The Widening Wealth Gap: Bringing Income Inequality Into Focus

Jan 2, 2014
Originally published on January 2, 2014 6:18 pm
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The debate over what to do about the long term unemployed comes in the midst of a larger conversation about income inequality. Democrats like New York's new mayor, Bill de Blasio, have made it a central talking point. President Obama himself delivered a big speech at the end of 2013 on what he called a relentless and damaging trend.

PRESIDENT BARACK OBAMA: And that is a dangerous and growing inequality and lack of upward mobility that has jeopardized middle class America's basic bargain that if you work hard, you have a chance to get ahead.

CORNISH: But what exactly is income inequality? Ask six economists and you're likely to get six different answers. And we're going to ask Drew DeSilver of the Pew Research Center who spent a lot of time lately trying to measure it. Welcome to the program, Drew.

DREW DESILVER: Thanks for having me.

CORNISH: So you've written that economists disagree on how much inequality there is and how to measure it so what are the most popular measurements for understanding inequality?

DESILVER: Well, there's all kinds of ways that you can measure income inequality specifically without even getting into whether you should be measuring wealth or consumption inequality or any other kinds of economic inequality. But if you're just looking income, you have to decide whether you want to look at taxable income, total gross income, do you want to include things like Social Security payments or unemployment insurance and depending on which set of numbers you use, you'll come up with different answers, although no matter which income measurement you use, you will see a generally rising trend over time, particularly in recent years.

CORNISH: So looking back, say, from the economic crash in 2008 to President Obama's speech last month, what has been the trend? Are we becoming more unequal and in what way?

DESILVER: Well, I like to look at the numbers compiled by the University of California researcher named Manuel Saiz and according to his figures, in 2008, the top 1 percent of American families had 20.9 percent of all income in the U.S. and by 2012, which is the most recent numbers he had, that had risen to 22.5 percent. Now, when you look at the bottom 90 percent, they had almost 52 percent of the national income in 2008. That had fallen below half to 49.6 percent as of 2012, which was the lowest in any of the years that Saiz had researched.

CORNISH: So you mention measures for understanding inequality so just looking at income inequality specifically, but what about wealth? Talk about the difference there in those numbers.

DESILVER: Well, when you look at wealth inequality, it almost always turns out to be a lot more unevenly distributed than income and one of the ways to look at that is by looking at the top 20 percent. The richest 20 percent of the U.S. families own 88.9 percent of all wealth in country, according to the research that I've seen, whereas the highest earning 20 percent of all U.S. families earned 59.1 percent of all income.

CORNISH: All right. But just to understand, the top 20 percent of U.S. families have 88 percent of all the wealth.

DESILVER: 89 percent.

CORNISH: Now, sometimes people kind of hear this information in a blizzard of numbers. Is there a statistic for you that feels like really reflects how stark the gap is or how controversial this debate is?

DESILVER: I guess one of the other numbers that really strikes me was an analysis that we did based on 2012 dollars about the disparity between household income by race and ethnicity. And if you look at that, the median household income for white Americans was about $57,000 in 2012. For black families, it was $33,300 and for Hispanic families, it was $39,000. And that really is, to me, a very large gap.

CORNISH: Why does there appear to be this widening of the gap since the 2007, 2008 financial crisis? I mean, we're in the middle of reporting this week about a surprisingly robust recovery of the stock market.

DESILVER: And that's true, but you have to remember that approximately half of Americans don't own stock in any shape or form, which is another way of saying that only about half of Americans are exposed to the stock market either directly or through their retirement accounts. And stock ownership tends to be very heavily concentrated in the upper income brackets. So the people who are most benefiting from the run-up in the stock market are folks who are already at the top of the distribution anyway.

CORNISH: That's Drew DeSilver. He's a senior writer for the Pew Research Center's fact tank blog. Drew, thanks for speaking with us.

DESILVER: Thank you very much for having me.

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