Inequality and Redistribution during the Great Recession – Economic Policy Papers – Publications & Papers | The Federal Reserve Bank of Minneapolis

In this paper, we explore the impact of the Great Recession on economic inequality and redistribution in the United States. We analyze many sorts of inequality (in earnings, disposable income, consumption expenditures and wealth) for different sections of the economic distribution.

Here we highlight three central findings.

• In 2010, the bottom 20 percent of the U.S. household earnings (which include labor, business and farm income) distribution was doing much worse, relative to the median, than in the entire postwar period. This is because this group’s earnings fell by about 30 percent relative to the median over the course of the recession. This lowest quintile also did poorly in terms of wealth, which declined about 40 percent.
• Redistribution through taxes and transfer programs reached historically high levels in 2010. As a result, spending power, captured by disposable income and consumption expenditures on nondurables, of this same lowest 20 percent did not significantly change relative to other economic groups during the recession.
• Although government redistribution protected households from fully bearing the impact of an earnings decline, households that experienced such a decrease nonetheless endured sizable drops in disposable income and drops in consumption expenditures.
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