The U.S. Distribution of Annual Wage and Salary Income since 1961: the Perceived Inequality Trend

John Angle, Inequality Process Institute

The literature on annual labor earnings in the U.S. interprets the trend toward greater dispersion as greater inequality. When the mean of earnings increases, dispersion increases as incomes increase by nearly equal proportions regardless of size. The experience of individual workers is not as uniform because they move around in the distribution of earnings. Rising education levels in the labor force lower the concentration of earnings despite increasing dispersion. The paper's model implies estimates of time-series of scalar statistics that closely fit observed time-series. The perception of an inequality trend rests on observed time-series of scalar statistics, particularly percentiles. What has been misperceived as an inequality trend is the mechanism distributing increments, nearly equal proportionally, to individual annual earnings, small, middling, and large, when the mean of earnings increases. 'Bonanza' is an apter tag for the phenomenon than 'inequality'.