Thursday, April 24, 2014

This Chart Provides a Good Picture of Inequality in the US...But Here's How to Make It Better

Yesterday, I came across this chart on income in the US:

It's 2010 data from the 2011 Annual Social and Economic Supplement to the US Census. A few years have passed, so the numbers will have changed slightly. The median wage (individual rather than household, nominal rather than real) has only gone up about 2% a year between 2010 and 2012, so the changes would be minor, especially with regard to the shape of the curve.

80% of households have an income under $100,000. About half of all households have an income under $50,000. The chart, as is obvious, is bunched up on the left. It is not a pretty bell curve with minimal poverty and minimal extreme wealth and a vast middle.

Note also that this is household income rather than individual income. More than one person is probably working.

However, there's a major weakness in this chart. Each increment is $5,000 until the end, where it's $50,000 to encompass the range from $200,000 to $250,000. This distorts the graph and, thus, fails to provide a fully accurate picture.

The chart lumps together $250,000 with $250,000,000 in a broad category of "over $250,000." $250,000 is certainly different (quantitatively and qualitatively) from $500,000 and from $1 million and from $10 million and from $100 million. Those differences mean a lot in terms of purchasing power and, perhaps more importantly, political power.

In 2010, according to the Social Security Administration, 81 individuals received compensation (reported on W-2 forms) over $50 million. This is individual income, rather than household income (which would likely be higher). However, let's use that $50 million for a quick exercise.
What would this chart look like if we went all the way out to those top 81 people? It would need to go out 9,950 increments past $250,000 to get to $50 million. But let's not forget that the $50 million is just the baseline for these top 81. Certainly, our increments would well pass 10,000 to reach the very top. Just imagine how long that chart would have to be.

The number of people receiving more than $50 million in compensation doubled between 2010 and 2012. I'd guess we'd probably need even more increments for a full chart in 2012.

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