Great Graphic: Thoughts about Income Distribution in the US

This Great Graphic comes from the Real-World Economics Review blog.   It is from Pew Research Center latest study.  Essentially it divides America by income into three groups.  The lower income group draws income that is less than 67% of the nation's median.  The middle income group earns income that is between 67% of the nation's median and 200%.  The upper income denotes households earning more than 200% of the median.  

The results are hardly surprising.  The middle class in America has, in the first decade of the new century, fallen in size and moved backwards in terms of income and wealth.  In Pew's research, this is the first time this has happened since the end of WWII.

What is happening is cannot simply be characterized as the impoverization or America.  The middle class may be being hollowed out, but this reflects upward as well as downward mobility.  A full fifth of the adults are in the upper income tier, compared with 14% in 1971.  Nearly 30% of adults are in the lower income tier, up from 25% in 1971.  

The share of household income that is going to the upper tier has risen to 46% from 29% in 1971, according to Pew Research, which also draws on Census data.  The lower tier accounts for about 9% of income, down from 10% in 1971.  That leaves the middle tier with 45% of the income, which is off from 62% in 1971.  

When contemplating the implications, note that this discussion is about income not wealth.  Income, economists point out, is flow term, whereas wealth is a stock terms.  The distribution of wealth is also highly concentrated.  Interestingly, consumption is not as unequally distributed as income and wealth.  The high income have higher quality of "things" (think a "Sub-Zero refrigerator vs GE).  They have bigger living space.  They also have more financial assets.  

However, consider the penetration rate of household durable goods, like televisions, computers, refrigerators and microwave ovens, and automobiles.  As counter-intuitive as it may seem, consumption is much more equally distributed than income or wealth.