In preparation for a presentation at the Retirement Income Industry Association (RIIA) later this month, I’ve been researching household incomes in the United States. My data source is the Census Bureau, which has a quintile breakdown of data from 1967 through 2009 (see Table H.3).
The pie chart here shows that the top fifth of households in 2009 took home 50% of the nation’s income. The middle fifth received 15% and bottom fifth a mere 3%.
The charts below show income growth over the complete data series. In addition to the quintiles, the Census Bureau includes the mean income for the top five per cent of households.
Most people think in nominal terms, so the first chart below illustrates the current dollar values across the 42-year period. (The phrase “current dollar” is econospeak for the value of a dollar at the time received.)
The next chart adjusts for inflation in chained 2009 dollars based on the Consumer Price Index. In other words, the incomes in earlier years have been adjusted upward to the purchasing power of the most recent year in the series.
Two things are particularly striking (but not surprising) in the inflation-adjusted chart:
- Income growth has been much higher for the top quintile and particularly the top 5% (the two lowest quintiles are essentially flat).
- The purchasing power of 2009 incomes had shrunk to about the same levels they were a decade or more before, depending on the segment.
The lack of sustained growth in household incomes is no doubt a major factor in the general decline in consumer confidence over the past decade.
Among the many subtle details evident in these charts, one that especially caught my attention was the fact that the bottom quintile has grown faster than the third and fourth quintiles. This curious fact is not apparent in the dollar charts above.
Also not evident in the dollar charts is the grim reality that (in real terms) households in the bottom quintile earned less in 2009 than they did in 1989 — 20 years earlier.