US / Income inequality is now near a record high reports a Senate Joint Economic Committee

Recent economic news has been encouraging. Gross domestic product (GDP) has grown for 10 straight quarters (growing by 4.1 percent at an annual rate in the third quarter of 2013), the economy has added private-sector jobs for 46 consecutive months and the housing market continues to strengthen. Despite the current economic recovery, the income inequality that began to rise more than three decades ago continues to increase. Income inequality is now near a record high.

As income inequality has increased, middle- and low-income households have had a harder time making ends meet. Middle-class incomes have stagnated, with the average American household making less in 2012 than it did in 1989 (adjusted for inflation), at the same time that healthcare and education expenses have increased significantly. Even being employed is not always enough to keep someone out of poverty. In 2012, 7.3 percent of workers aged 18 to 64 lived in poverty. Raising the minimum wage would help reduce the number of working Americans in poverty. If the minimum wage were raised to $10.10 per hour (as proposed in legislation currently before Congress), 4.6 million Americans could be lifted out of poverty.

Rising income inequality has contributed to lower economic mobility: 43 percent of Americans raised in the bottom income quintile remain there as adults, while 40 percent of those raised in the top quintile maintain that status. Economic mobility in the United States is lower than in most other advanced economies.

This report examines trends regarding poverty, the middle class, income inequality and economic mobility in the United States. It also suggests policy changes that can be implemented to ensure that our economy provides good opportunities for all workers.