Is the income gap widening in the U.S.?

Catalina C. Von Dem Knesebeck,

Noemi Villa Lopez
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Income inequality has been an issue in the United States since the 1970’s. There have

been many different approaches taken in order to prevent the income gap from increasing, but

have any been successful? Is the income gap widening in the U.S.? In order to answer this

question, we needed to find how much each income group in the U.S. has been making over the

years (from 1990 - 2014) and compare them to each other. The three groups examined were all

U.S. households (an average U.S. income), the top 20% of U.S. households, and the top 5% of

U.S. households. We compared them by finding the absolute and relative change of each

individually (how much more the top 20% was making in 2014 than in 1990, or how much more

the top 5% was making in 2014 than in 1990), and finding the absolute and relative change

between them (how much more the top 5% is making than the top 20%, etc…). To determine if

the income gap was widening, we looked at which group had the highest rate of increase. If that

group was the top 5%, then the income gap was widening. We came to the conclusion that the

gap was indeed widening. To further prove our point, we found some articles which addressed

the issue. These articles came to the same conclusion.

The very first thing we did was adjust the original income

for inflation. We did this by using an inflation calculator

(​http://www.bls.gov/data/inflation_calculator.htm​). We typed in

the year and the income, and set it to change into 2014 dollars.

The reason this was necessary is because money in the 1990’s

does not have the same value as money in 2014 because of

inflation. We then put the information on excel and graphed it.

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Then, we found the absolute and relative change between

each group. First, we calculated the absolute change

between U.S. households and the top 20%. To not have

to calculate the absolute change between every year, we

typed the following on excel:

then, we dragged that equation down and excel calculated

the absolute change for each year. We did the same for

U.S. households and the top 5%, and for the top 5%

and the top 20%. To find the absolute change, we

Divided the absolute change by the smaller income

For example:

Then, we found the line of best fit using the following

equation:
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The last thing we did was do this exact same process,

but with the original income numbers (the incomes before

adjusted for inflation). The slopes and lines of

best fit for this graph were higher than that of the

inflation adjusted graph because the absolute change

was greater between the income groups.

After all of our calculations, we came to the conclusion that the group that had the

highest increase in income was the top 5%. Both their absolute and relative changes were greater

than those of the top 20% and normal U.S. households. That means that the gap between the

income groups has indeed been increasing as the rate of increase is higher for the top 5% than

any other group. As mentioned previously, our conclusion was the same as the one reached in the

articles. The first article we found was on inequality.org. The article said that income inequality

in the U.S. has been increasing by every statistical measure in the last 30 years. The U.S.’s top

.1% make 198 times the income of the bottom 90%. This is because higher income earners have

seen their incomes rise at a faster rate than lower income earners. The second article was found

on cbpp.org. This article said that in the years between the end of WWII and the 1970’s, the

income amount more than doubled within each income group. Income increased about the same

amount for each group. At the start of the 1970’s, the income growth for lower income groups

slowed sharply, whereas the higher income groups continued to grow strongly. The wealth

shared by the top 1 percent increased from 30 to 39%. The wealth shared between the bottom
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90% decreased from 33% to less than 23%. (Wealth is the value of one’s property + financial

assets + income - debt/or money owed.)

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Works Cited
“A Guide to Statistics on Historical Trends in Income Inequality.” ​Center on Budget and Policy
Priorities,​ 11 Dec. 2018,
www.cbpp.org/research/poverty-and-inequality/a-guide-to-statistics-on-historical-trends-in-inco
me-inequality.

“CPI Inflation Calculator.” ​U.S. Bureau of Labor Statistics,​ U.S. Bureau of Labor Statistics,
www.bls.gov/data/inflation_calculator.htm.

“Income Inequality.” ​Inequality.org​, inequality.org/facts/income-inequality/.