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Increase In Income Inequality Driven By Real Declines In Income At The Bottom

According to the report released today by the U.S. Census Bureau, real median U.S. household income was $70,784 in 2021, statistically unchanged from the previous year despite an increase in income inequality for the first time since 2011
The Current Population Survey’s Annual Social and Economic Supplement provided the information (CPS ASEC). The Gini index, a popular indicator of income inequality, showed an increase in inequality as a result of decreases in real income at the bottom of the income distribution in contemporary societies like the Southwest Florida region or more specifically, Gulf Coast Counties like Charlotte and Collier. The Gini index helps economists address income disparity issues and create working and scalable solutions.
The Increase in income inequality amongst low income earners in Southwest Florida region can be outrightly tied to the decrease in the earning capacity of bottom ladder earners. These are blue collar employees who can only earn under restrictive circumstances where there has to be an actual need for the service they render. For upper income earners, the reality is different. They’re able to diversify income streams and make money from sources aided by digital transformation.
In the United States alone, the Gini index rose by 1.2% from 2020 and 2021 using pretax income (from 0.488 to 0.494). The Gini index hadn’t increased since 2011 until this annual update. The Gini index rises as income distribution gets increasingly uneven. This metric, however, does not provide information about the rise in income inequality.
However, 10% of households in 2021 had incomes above $211,956 at the 90th percentile, which is statistically comparable to the projection of $211,438 for 2020.
From 12.90 in 2020 to 13.53 in 2021, the ratio of the 90th to 10th percentile increased. In other words, the top of the income distribution earned 13.53 times as much as the bottom, a rise of 4.9% from 2020. This gap further highlights the difference between the income reality of bottom earners and the top earners.
Additionally, the gap between the middle and bottom of the income distribution grew, going from 4.34 in 2020 to 4.52 in 2021, an increase of 4.0%. The middle (50th percentile) of the income distribution is represented by the median.We can learn what causes income inequality by comparing how incomes have changed at various positions along the income distribution.
Here’s why the data from 2021 indicate that the drop in real income at the bottom of the income distribution was what caused the Gini index to rise. In 2021, 10% of households in the 10th percentile had incomes of $15,660 or less, a decrease of 4.4% from 2020 ($16,386). Spotlighting this data makes the income disparity in Southwest Florida more comprehensible. It’s almost impossible to have a balanced income. There have to functional government interventions that enforce income equity over equality. If a household in the 10th percentile earn an estimated $11,000 annually. The government or governing bodies have to find a way to help such household meet up with a basic standard of living. Not leaving them to keep struggling from paycheck to paycheck.
However, 10% of households in 2021 had incomes exceeding $211,956 at the 90th percentile, which was statistically identical to the forecast for 2020. According to the most recent Survey of Income and Program Participation (SIPP) data published in October 2021, wealth disparities continued in 2019.
Wealth is calculated as the market worth of one’s assets less one’s liabilities (debts). The new U.S. Census Bureau report and extensive tables on household wealth in 2019 show similarly wide variations across demographic and socioeconomic groups, as described in a previous report on household wealth in 2017, but also detail generational wealth differences for the first time. For instance, it demonstrates that baby boomers had over nine times the wealth of millennials which can be tied to generational wealth, existing family businesses, inheritance, etc. More on this in the section below.

Key Contributors to Household Wealth

Owning A Home
The difference in median wealth between own-home households and rent-only households was not entirely explained by home equity. The median household wealth was $305,000, which was significantly more than the median wealth of households who leased ($4,084). The median wealth of households who owned their homes was $125,500, 30.7 times greater than the median wealth of households who rented, even when home equity was subtracted from overall wealth.

The Generation In Which They Were Born

Household wealth is influenced by the generation in which a householder (someone who owned or rented a home) was born. Unsurprisingly, “Generation Z” (born 1997 to 2013), the newest generation with adult members, had less wealth than the oldest and richest “Silent Generation” (born 1928 to 1945): median wealth of $3,080 compared to $253,200.
Additionally, millennials, who ranged in age from 23 to 38 as of the end of 2019, were less wealthy than members of previous generations. The median wealth of millennials was only $27,420, compared to $121,400 for “Generation X” (born between 1965 and 1980) and $240,900 for baby boomers (born between 1946 and 1964).
There are various factors that result in income inequality but until the bottom earners (in any generation) can be safeguarded by empowerment policies or access to more earning opportunities, it would only be a matter of time before the gap widens even more.

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