Income Inequality & The Decline Of The Middle Class In Two Simple Charts

Friday, May 3, 2019
By Paul Martin

by Charles Hugh Smith via OfTwoMinds blog,
Fri, 05/03/2019

Now look at the middle quintiles–the middle class: their income has gone nowhere in the past decade.

These two charts of average incomes of U.S. households by quintile (bottom 20%, middle 60% (20%+20%+20%) and top 20%) have both good news and bad news. (Charts are from the non-partisan Congressional Budget Office — CBO).

These charts depict 1) household income before transfers (means-tested government benefits) and taxes, in other words, pre-tax earned income, income from capital gains and interest, unemployment insurance, etc., and 2) income after federal transfers and taxes.

This is a much more accurate view of household income, as this is what gets deposited in households’ accounts.

The typical chart of average incomes doesn’t include government transfers, so it under-reports the actual income of households receiving means-tested government benefits. (Note that the CBO methodology may not include all government transfers, as not all transfers are means-tested, i.e. based on income and other qualifying factors.)

The CBO reports periodically on the Distribution of Household Income and Federal Taxes, but it doesn’t generate these charts every year. (Go to Congressional Budget Office reports and scroll down to Distribution of Household Income and Federal Taxes).

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