We compare median and average income growth in the U.S. from 2019 to 2022 (our source is Changes in U.S. Family Finances, Federal Reserve).
On the one hand, the average income of the highest-income Americans is growing faster than that of the lowest-income Americans. On the other hand, the average income of the 20%, and even more of the 10%, of Americans with the highest incomes is growing much faster than their median income, while average and median incomes are growing at roughly the same rate for the 80% of Americans with the lowest incomes.
This shows that there is an overall rise in income inequality, and that the increase in income inequality is concentrated on those with the highest incomes. The same pattern can be seen when we compare the rise in median income and average income according to level of education (only those with a university degree have an average income that has risen significantly more than their median income) and when we compare the rise (again from 2019 to 2022) in median income and average income according to level of wealth (only the richest 10% have an average income that has risen more than their median income).
All in all, income inequality in the United States has been rising sharply since 2019, due to the sharp rise in income among those with high incomes and wealth, who have a high level of education. Since the household savings rate is higher for high-income households, we can expect a rise in the overall savings rate.
The high level of inequality also explains why Americans seek protection against declining income, which implies higher investment in human and productive capital.
