Demography and income inequality

The differences in income among various groups of households is of keen interest today, but before we make conclusions about these differences, says N.C. State University economist Mike Walden, it’s important to look beneath the surface at underlying factors that may contribute to those differences.

“First of all, if we look at what the income disparity is, the latest data show that the richest 20 percent of households earn about $170,000 a year, while the poorest 20 percent earn about $11,000. Now that’s a big difference, but the question is, Do characteristics of those households, particularly demographic, contribute to that? And the answer is yes.

“First of all, richer households have more workers working per household. That is, it’s more likely in a richer household, for example, for both parents work than it is in a lower-income household.

“Also of the poor households, 80 percent of the poorest 20 percent of households are single parents, compared to only 22 percent of the richest 20 percent of households. And, of course, being a single parent is very difficult — a lot of demands on your time. But often that may translate into less income-earning opportunities.

“Three quarters of the richest households are in their prime working years, when we’d expect their salaries (to be) the highest, whereas only 44 percent of the poorest households are in their prime working years.

“Eighty percent of the richest households worked full time … compared to only 17 percent of the poorest households. And perhaps the most telling, 60 percent of the richest households have a college degree, which usually translates into higher income. Only 12 percent of the poorest households have a college degree.

“So there are a lot of factors that go into what someone earns and go into income disparities. But clearly there are some key demographic factors that help explain a great deal of this.”