Last month, Moody’s Investors Service issued a report warning that rising income inequality in the U.S. could ultimately lead to a debt downgrade.
The crux of the gloomy outlook is that the deficit is likely to surge as inequality increases the need for more social spending to support the lower class.
This, as tax cuts continue to bolster the wealthy.
The longer-term trend is clear: Over the past two decades, the top 10% of income earners have enjoyed a nearly 200% increase in their overall median net worth, while the bottom 40% of earners have seen a decline.
To put the big picture trend in perspective, Nick Routley of the Visual Capitalist blog created this chart by distilling 125 million American households down into 100 homes and color-coding them into $25,000 income increments:
As you can see, only one house is allocated for those making $300,000+ per year, whereas there are 24 riding the poverty line by taking home $25,000 or less. Almost half of the households have an annual income lower than $50,000.
Routley used Census data to break it down even further:
Rutley also points out that the median household income in the U.S. continues to set new monthly records. What’s more, we just saw this decade’s biggest year-over-year increase in individual wages.
“One side effect of this economic growth is that households in the top wage bracket — the well-appointed yellow square in our visualization — have a tendency to reap outsized rewards,” he wrote in the blog post. “So, for now, as America’s economy trends upward, so does its Gini coefficient.”
The Gini coefficient is a statistical measure of distribution, developed by Corrado Gini in 1912. It’s used to gauge the level of inequality in a particular country or region. The higher the number, the wider the chasm between rich and poor.
