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.