The Inequality of Disposable Income versus Earned Income

The chart below tracks the ratio of income of those in the 95th percentile of income to those in the 50th percentile -- in other words how well the highest earners fare compared to middle income earners. The media and hysterical liberals (admittedly there is a lot of overlap) focus on the blue line below. Market income is “wages, salaries, business and farm income, interest, dividends, rents and private transfers (such as alimony and child support), of all household members.” Disposable income is Market Income minus taxes plus government transfers like social security, welfare payments, food stamps, medicaid, etc. The former is a good measure of how much more top earners earn than middle income earners earn. The latter is a better measure of how much better off one is versus the other.

It's pretty clear from the chart below that upper earners, despite more top-line income, are relatively not any better off today than they were 20 years ago. The reason, of course, is that they are disproportionately high payers of taxes and disproportionately low receivers of welfare and other government transfers.