Unexpectedly Intriguing!
May 31, 2007

We're going to do our best to tell the story of what happened for the distribution of income by age group between 1995 and 2005 in pictures, simply by comparing the number of people of a given age at given income levels for both years, after adjusting for inflation. Beginning with the Age 15-24 group:

Age 15-24: Number of Income Earners vs Annual Income (2004 USD), 1995 and 2005

Now, the Age 25-34 group:

Age 25-34: Number of Income Earners vs Annual Income (2004 USD), 1995 and 2005

The Age 35-44 group:

Age 35-44: Number of Income Earners vs Annual Income (2004 USD), 1995 and 2005

Next, the Age 45-54 group:

Age 45-54: Number of Income Earners vs Annual Income (2004 USD), 1995 and 2005

The Age 55-64 group:

Age 55-64: Number of Income Earners vs Annual Income (2004 USD), 1995 and 2005

And finally, the Age 65-74 group:

Age 65-74: Number of Income Earners vs Annual Income (2004 USD), 1995 and 2005

Common Threads

A surprising amount of upward income shifting has occurred at the lower end of the income spectrum in the time between 1995 and 2005. We see this change clearly in the rightward shift of the "peak" number of individuals at a given annual income. We also see this more generally in the 2005 distributions being to the right (greater income) of the 1995 distribution for equivalent numbers of individuals.

For the Age 25-34 and Age 35-44 age groups, there have been substantial decreases in the number of individuals earning low incomes, even though the number of individuals at higher incomes has remained relatively stable for these groups.

For all age groups, we really don't see a significant increase in the number of top income earning individuals, with the exception of the Age 45-54 and Age 55-64 ranges, likely due to the influx of the "Baby Boomers" into these age groups.

For all age groups, the trend from 1995 to 2005 is to have fewer individuals at the lowest end of the income spectrum and substantially more at the mid-to-high end.

Preliminary Conclusions

The net result of these changes suggests that the increase in income inequality in the United States from 1995 to 2005 is primarily driven by reductions in the numbers of low income-earning individuals combined with an upward shift in the number of individuals earning middle-to-high end incomes, as we've demonstrated above in the charts for the Age 15-24, Age 25-34, Age 35-44 and Age 65-74 age groups.

Meanwhile, the impact of the baby boom generation is being felt as the leading edge of this generation entered the Age 55-64 group and continued to grow in the Age 45-54 group. In both these age groups, significant increases in the number of individuals at nearly every income level occurred, most remarkably in the Age 55-64 group, which saw proportionately more high income-earning individuals join its ranks.

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