Household Inequality Is Not Individual Inequality

by Don Boudreaux on June 4, 2014

in Data, Inequality, Myths and Fallacies

Here’s a letter to the Washington Post:

Kelly Breazeale argues that income inequality is at worrying levels because the Gini ratio - a popular measure of income inequality - is today higher than it has ever been for American households since the Census bureau began calculating it in 1967 (Letters, June 4).  True, but misleading.

Although the Gini ratio for households is indeed today at an all-time high, the Gini ratio for individuals has remained flat since 1960.  This reality means that, because income inequality among persons hasn’t risen in more than a half-century, the rise in inequality among households over that time is caused by changes in the composition of households.

Specifically what’s happened is that, starting around 1970, the percentage of single-person households (especially those of women over the age of 65) has increased.  Because single-person households (especially those of women over retirement age) generally earn less income than do multiple-person households, household inequality has risen even though the inequality that surely matters most (if inequality matters at all) - inequality among flesh-and-blood individuals - has remained unchanged.*

Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA  22030

* See especially the fourth figure here. (I thank my friend Jon Murphy for these data).

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