The State of America's Children® 2020

Income and Wealth Inequality

>>>The State of America’s Children 2020 – Income and Wealth Inequality
The State of America’s Children 2020 – Income and Wealth Inequality2020-02-18T15:01:13-05:00

A Growing Divide That Harms Children

39%

Of total U.S. wealth is held by the richest
one percent of households

The United States is the richest nation in the world, with more than enough resources to provide for the basic needs of every child. Unfortunately, these resources are not distributed according to the needs of our most vulnerable children, but according to the rules set by the wealthiest few who prioritize their further enrichment above all else. The top one percent of Americans control a disproportionate share of the country’s income and wealth, getting richer and richer while millions of children live in poverty. And it’s getting worse.

In 2018, the gap between the incomes of the richest and poorest American households grew to its widest point in 50 years. Income is the revenue a person or family receives either from work or return on investments. Income inequality is the extent to which income is distributed disproportionately across a population and it has been rising in the United States since the 1970s, when the post-World War II boom economy gave way to a long-term trend toward slower economic growth and slower wage growth for lower-income workers.

Over the past few decades, incomes have generally been rising for everyone. In 2018, median household income stayed near its 2017 level—the highest in recorded history.1 This story of broad shared growth is misleading, however; income growth for the wealthiest few has far outpaced growth for everyone else. Since 1980, incomes for the top 1 percent of earners have grown by 226 percent, compared with only 47 percent for the middle 60 percent of earners.2 These unequal growth rates have produced astonishing present-day income disparities:

  • The top 20 percent of households earn, on average, about 16 times more than households in the bottom 20 percent. In 1975, the top 20 percent of Americans earned 10 times more than the bottom 20 percent.3
  • A member of the top 10 percent of income earners makes more than 39 times as much as the average earner in the bottom 90 percent; the average member of the richest 0.1 percent of the population earns about 188 times more than an average earner in the bottom 90 percent.4
  • In 2016, half (50 percent) of all income earned went to the top 10 percent of Americans and a quarter (24 percent) went to the top 1 percent alone (see Figure 1).5

In short, income growth has been concentrated at the top of the income distribution for decades and has had corrosive effects on the American Dream—particularly for our nation’s children. Absolute income mobility has steadily declined since 1940, meaning children born into low-income families may make less money than their parents and income inequality may worsen going forward.6

Income inequality also contributes to another runaway economic problem: wealth inequality. Wealth or net worth refers to the total value of a person or family’s money, property and other assets minus any debt they hold; wealth inequality refers to the disproportionate distribution of wealth across a population. Like income inequality, wealth inequality has also been rising for decades and has reached levels not seen in nearly a century. Today, wealth is more concentrated than income.7

  • Between 1989 and 2016, the share of wealth held by the top 1 percent of Americans rose from 30 to 39 percent while the share held by the bottom 90 percent fell from 33 to 23 percent.8 In 2016, the top 10 percent of Americans owned more than 75 percent of all wealth (see Figure 2).9
  • Since the 1980s, the number of households with a net worth over $10 million grew by 856 percent while the proportion of households with zero or negative net worth grew by 37 percent.10
  • The three richest men in the United States—Jeff Bezos, Bill Gates and Warren Buffet—hold as much wealth as the entire bottom half of Americans, more than 160 million people.11

Income and wealth inequality not only exists between the rich and poor but also between different racial and ethnic groups.

  • In 2017, the median family income of white households with children ($88,200) was more than double that of Black ($40,100) and Hispanic households with children ($46,400) (see Table 7).
  • For every $1 earned by the median white household in 2018, the median Black household only earned 59 cents and the median Hispanic household earned 73 cents.12
  • The median net worth of white families ($139,300) was almost eleven times more than Black families ($12,780) and seven times more than Hispanic families ($19,990) in 2015.13
  • The racial wealth gap is the product of centuries of racial discrimination that have denied families of color the opportunity to build wealth and policy choices—such as the preferential treatment of income from investments—that perpetuate existing fortunes but don’t help to create new ones.14 Largely as a result of these historical factors, less than half of Black (42 percent) and Hispanic households (46 percent) owned their home in 2016 compared with 72 percent of white households.15 Nearly one-third of the racial wealth gap is explained by differences in homeownership rates.16

Inequality is a global phenomenon, but the U.S. does not fare well even when compared with other industrialized countries. In 2019, the U.S. held the largest share of the world’s wealth (nearly 30 percent).17 Studies suggest, however, that the U.S. has the highest level of wealth inequality and one of the highest levels of income inequality among developed countries.18

Immigrant Children are America’s Children: Inequality

Deferred Action for Childhood Arrivals (DACA) recipients are students pursuing college degrees and educators teaching the ABCs.19 They are engineers innovating the latest technologies and help desk geniuses.20 They are first responders and service members.21 They are friends and neighbors woven into the fabric of our communities. And, perhaps most vitally, they are parents tucking children into bed each night.

More than 250,000 children have at least one parent who is a DACA recipient.22 If the Trump administration is allowed to proceed with its plans to cancel DACA, children will suffer developmental, psychological and economic harm.

DACA is a work authorization; it allows parents to pursue careers that support their families. Parents’ loss of work authorizations would mean they are no longer able to work legally, which translates into lost income, poverty and exacerbated wealth inequality. Losing authorization also makes parents vulnerable to exploitation; the need to support a family could push parents into poor or exploitative work environments with pay below the minimum wage, extreme work hours and no benefits.