Wednesday, June 8, 2016

Income Inequality Is Higher Among Black Households Than Asian Or White Households

Income inequality is higher among Blacks than Asians or Whites. See the chart below from The St. Louis Federal Reserve FRED Economic Data Series, "Income Gini Ratio For Households By Race Of Householder:"

Source: FRED Economic Data

Does the higher income inequality among Blacks mean we need to redistribute the income from richer Black households to poorer Black households? Of course not. The median income of Blacks is lower than the median income of Asians or Whites, as the following chart from Business Insider, "American Median Incomes By Race Since 1967 [CHART]" by Steven Perlberg shows:

The higher income inequality among Blacks is a good sign.

Income has a lower value of $0 and does not include the value of many government benefits available to lower income households, such as SNAP (formerly Food Stamps), subsidized government housing, housing vouchers, Medicaid, Earned Income Tax Credit, etc.

The inequality in income among Black households is an indication that there are households that are earning income in amounts that can tip the inequality measure upward. It is a sign of economic progress among some, but not enough, Black households. As more Black households make economic progress and see an increase in their household income compared to receiving government benefits, inequality measures will continue to increase until the point that economic progress and income increases reach the lowest income Black households. As Black households move away from government benefits not included in income measures to more earned income, income inequality among Blacks will eventually reach a maximum and then begin to show a decrease.

Among Black households, the high income inequality measure is an indication of poverty and reliance on government benefits. It is not an indication of too much income earned by too few at the top.

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