Why we insist that personal income inequality does not change

We have already reported that the personal income distribution in the USA does not change with time when normalized to the total population and total income. In other words, the relative distribution of personal income in the United States has not been changing since the start of income measurements in 1947. The accuracy of early measurements is not good enough, however, and we have to rely of the most recent results.

The US Census Bureau routinely reports income estimates obtained during the Annual Social and Economic Supplement of the Current Population Surveys. We have retrieved the population distribution over mean income in the range from $0 to $250,000 which is available only from 2000. The relevant measurements of the number of people in a given income range were carried out in $2500 bins between $0 and $100,000 and $50000 bins between $100,000 and $250,000. In order to suppress the influence of the width we have calculated the population density, i.e. the ratio of the number of people in a given bin and its width. The personal income is measured in current dollars and thus we have to reduce all incomes by the total change of the GDP deflator (one may also use CPI which gives a 20 per cent higher inflation rate) since 2000 to a given year. Figure 1 shows the result of normalization for 2000, 2005, and 2010. In relative terms, the income distribution has not been changing since 2000. At higher incomes, all three curves are practically identical. This observation is validated by the estimates of Gini ratio provided by the Census Bureau.

Figure 1. The population density function, PDF, as a function of mean income as normalized to the total personal income for a given year. At higher incomes,  the curves are practically identical.