The Causes of Income Inequality, Revealed

In 1995, Scott and I wrote a paper titled The Truth About Income Inequality, which was published by Center of the American Experiment, the organization I now lead. It got quite a bit of national attention, and I subsequently debated Congressman Martin Sabo, who then represented Minneapolis, on the subject at a Center-sponsored event that was televised by C-SPAN.

That paper looked at the issue of income inequality from a variety of perspectives. The data obviously would need to be updated, but conceptually the paper holds up very well. Starting with the fact that income inequality is good, not bad. In fact–if you think about it–a society without income inequality would scarcely be worth living in.

At Townhall, Terry Jeffrey looks at income inequality through the lens of Census Bureau data and identifies the “culprit”: “Married Couples With Children and Jobs Cause Income Inequality.”

Liberals talk about “income inequality” as if it is caused by insufficient government action — including insufficient taxation of those they call the “rich.”
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But what really causes income disparity in the United States? Who makes more than whom?

The Census Bureau’s annual report on American incomes…presents data that answers these questions.

It turns out that income has a lot more to do with culture and behavior than anything else.

Of the seven types of households listed in Table HINC-01, the wealthiest were married-couple families, which had a median income of $87,057.

It was a steep drop from there to second place: Family households with a male householder — but no spouse present — had a median income of $58,051.

That was $29,006 — or 33.3 percent — less than married couple households.

The next wealthiest households were nonfamily households with male householders, which had a median income of $41,749.

Then followed families with female householders but no spouse present ($41,027); male householders living alone ($35,265); nonfamily households with female householders ($30,572); and female householders living alone ($26,877).

So marriage is the first great driver of income inequality. But what happens if you have children?

Married couples with no children had a median income of $81,529 in 2016. Married couples with one child between 6 and 17 years of age had median incomes of $95,965. Married couples that had two or more children between 6 and 17 had median incomes of $102,657.

In America, moms and dads with at least two young kids have a median income ($102,657) approximately three times that of men who live alone ($35,265).

Funny how that works. Of course, having children in the home correlates positively with prime earning years, which I assume is reflected in these numbers. More on that later.

Education is another culprit. Shockingly, those who obtain training and education generally earn more money than those who don’t. (I look forward to the day when social scientists, at great trouble and expense, will demonstrate something important that my grandmother didn’t already know.)

The other thing that correlates highly with earnings (as opposed to income, which includes welfare and other government payments) is work. I know, how many surprises can you take in a single day?

Of the 126,224,000 households in the United States in 2016, according to Table HINC-01, 29,750,000 — or 23.6 percent — had “no earners” at all. These households had a median income of $22,272.

They were surpassed by households with one earner ($48,550), two earners ($94,679), three earners ($115,357), and four earners or more ($143,000).

American households where two people worked ($94,679) had more than four times the median income of households where no one worked ($22,272).

I should hope so! If you think it is “unfair” that people who work have higher incomes than people who don’t, we can say with confidence that you are a liberal.

As Jeffrey points out, age also plays a major role. Shakespeare said that one man in his time plays many parts, and that is certainly true economically. Pretty much everyone starts out with a relatively low income, earns more as he gains experience, training and useful relationships, and then earns less as he transitions into retirement. If there were no income inequality, we would all be stuck at our 18-year-old wage forever.

Jeffrey concludes:

There is not a class war in America. There is a cultural war. It is between those who pursue the traditional life of the American dream and those who want to reduce more Americans to a broken life of government dependency.

Someone should explain this to the ignorant leftists who are attacking Professors Amy Wax and Larry Alexander.

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