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Measuring income inequality as a ratio

Typically, the most affluent earn 13 times more than the least affluent

U.S. Census data in FRED has helped us examine income inequality before, including mean and median income and the Gini ratio. Here, we examine income inequality through a different lens.

The GeoFRED map above shows the level of income inequality across U.S. counties. This particular measure is the ratio of average (mean) income for the highest earners (top 20%) divided by the average income of the lowest earners (bottom 20%) for each county. The Census data track the average income over a five-year period, in this case 2014 to 2019, to account for the fact that people’s income changes from year to year.

Measured this way, income inequality can be as high as 90 or as low as 5. That means that the most-affluent households in a particular county can earn as much as 90 times or as little as 5 times what the least-affluent households do. But those are the two extremes of income inequality. The typical (median) value is 13 times.

Because income levels vary widely across counties, two counties with similar degrees of income inequality can have very different economic profiles. For example, both Bath County, KY, and Ocean County, NJ, have a typical income inequality ratio, but the percentage of persons below the poverty line is 2.4 times higher in the Kentuckian county than in the New Jerseyan county.

How this map was created: From GeoFRED, click on “Build new map” (green button, northeast corner of the screen) and then click on “Tools” (orange cogwheel button, northwest corner). Under “Region” select “County,” under “Data” select “Income Inequality,” and under “Date” select 2019. Note that you can also edit the colors, legend, and labels.

Suggested by Diego Mendez-Carbajo.

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