How the U.S. compares on income inequality and poverty

BY Elizabeth Shell  June 19, 2014 at 4:45 PM EST
income inequality poster

Creative Commons photo by Flickr user mSeattle.

There’s new data on income inequality out from the OECD Thursday, so we thought we’d take a look to see how the U.S. compares against the group’s 33 other countries — and its upcoming World Cup matches (more on that in a bit).

When we look at income, the U.S. has had a wider gap — meaning less equal distribution of income — than the OECD average for at least the past 30 years.

Note: The OECD computes the Gini Coefficient based on income after for taxes and transfers, and adjusts for differences in household size. Not all countries’ data are available for every year, so the results are not strictly comparable. The interactive is meant to highlight trends.

The data also shows that lower-income households across the OECD were hit harder by the financial crisis — the poor either lost more during the crisis or benefited less from the recovery than did their higher-income neighbors.

While real household income hasn’t changed much (stagnated) across the 34 member countries, young adults have been hit the hardest since the financial crisis. By age, 18- to 25-year-olds “suffered the most severe income losses,” while those 65 and older “were largely shielded from the worse effects of the crisis,” according to the release. The young also continue to beat the elderly for greater risk of poverty, a trend the OECD has tracked for at least 25 years.

While the report doesn’t give much explanation as to why this is, high youth unemployment and more generous social services for those 65 and older are likely to have something to do with it.

In the U.S., poverty has averaged around 26.92 percent of the population with an income less than 50 percent of the country’s median income, after taxes and benefits are added (how the OECD defines “relative income poverty”). For years with data available since 1983, it maxed at just under 18 percent in 1989; the lowest was 16.5 percent in 2009. In fact, the U.S. poverty rate in 2011 was higher compared to all other OECD countries other than Israel, Mexico and Turkey.

You can take a look at the data for all 34 countries, but for a bit of fun we decided to see how the U.S. compares against the two countries it’s competing against next in the World Cup — Portugal and Germany — for income distribution and poverty.

To measure income inequality, we use the Gini Coefficient. It ranges from zero to one, with zero representing a completely equal distribution of wealth, and one referring to a single person holding the entire country’s wealth. So the higher the score, the more income equality there is. In 2011 (the year with the most complete data available), Germany had the lowest Gini score (0.29). Portugal’s was 0.34 and the U.S. was at .39 — meaning fewer people in the U.S. held more of the wealth, while income in Germany was distributed more equally. As for poverty, Germany was the lowest of the three, at 8.7 percent, followed by Portugal at 11.9 at the U.S. at 17.1 percent in 2011. For all years with available data, the U.S. has had the highest poverty rate as well as the highest Gini score.

So at least by those measures, the U.S. comes up short compared to it’s next two World Cup matches. And we can’t offer any predictions based on who the U.S. has played already, as Ghana is not a part of the OECD and therefore wouldn’t make a very good comparison.