NCPA - National Center for Policy Analysis

Facts And Myths About Income

December 1, 1995

Despite dramatic stories about a widening inequality of incomes and a disappearing middle class, the data show that income is about as widely distributed today as at any time in American history, and is less concentrated among top earners than it was prior to World War II. According to a recent analysis of data from the Census Bureau, Bureau of Labor Statistics and the Federal Reserve:
  • Differences in family income largely reflect how many members of a family work and how much they work.
  • For example, only 45 percent of families in the lowest 20 percent by income have anyone employed, and only 24 percent have a full-time worker.
  • In contrast, in the top 20 percent of families by income, 83 percent have two or more income earners and 11 percent have four or more earners.

Real income per person rose by 40 percent between 1969 and 1992, outpacing average growth in family income. Average family income grew at a much slower pace due to the increasing number of single-parent families. The reason middle-class families have shrunk as a percentage of all families is mainly due to the increasing percentage of higher-income earners.

  • In constant 1990 dollars, the percentage of families with incomes of more than $50,000 grew from 24 percent in 1970 to 32 percent in 1990.
  • The best period for real income growth over the last 25 years was the Reagan boom from 1982 to 1989.
  • During that period, the real income of middle-class families rose by an average of 12.6 percent and families in the lowest 20 percent of incomes saw real earnings increase by 12.9 percent.

Finally, historical data show that the earnings of all income groups rise and fall together, and that no group gained in those periods when higher-income families lost ground.

Source: John H. Hinderaker and Scott W. Johnson, "The Truth About Income Inequality," December 1995, Center of the American Experiment, 1024 Plymouth Building, 12 S. 6th Street, Minneapolis, MN 55402, (612) 338-3605.

 

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