THE DISTRIBUTION OF INCOME AND WEALTH

Statistics show that in 1998 the median income of American families was $38.885-this means that half of all families received less than this figure while half received more. This number concerns the distribution of income, which shows the variability or dispersion of incomes.’ To understand the income distribution, consider the following experiment: Suppose one person from each household writes down the yearly income of his or her household on an index card.

We can then sort these cards into income classes. Some of the cards will go into the lowest 20 percent, the group
with under $16,116 ofincome. Some go into the next class, A few go into the top 5 percent of households, those with incomes of $132,~ and above. The actual income distribution of American households in 1998 is shown in Table 19-1. Column (1) shows-the different income-class fifths, or quin-‘ tiles, plus the top 5 percent of households. Column (2) ‘shows the range of household incomes in each income class, Column (3) shows the percentage of the households in each income class, while column (4) shows the percentage of total national income that goes to the households in an income class. Table 19-1 enables us to see at a glance the wide range of incomes in the U.S. economic The poorest • fifth of U.S. households have incomes less than $16,116, while households in the top fifth have incomes of more than $75,000. About 5 percent of households have incomes over $132,200. Some earn much more than that, but as you move further up the income pyramid, the numbers get smaller and smaller, If we made an income pyramid out of building blocks, with each layer portraying $500 of income, the peak would be far higher than Mount Everest; but most people would be within a few feet of the ground.

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