The FRED Blog has examined family incomes in the United States before, specifically the typical (or median) family income and its growing gap relative to the average (or mean) family income. Here, we revisit the topic of regional income inequality by comparing differences in the evolution of median and mean family income.
The FRED graph above uses U.S. Census data to show how different the typical (or median) family income is from the mean (or average) family income. The graph is divided into the four regions defined by the Census: Northeast, Midwest, South, and West.* Each line plots the regional dollar value, measured at 2020 prices, of mean family income divided by median family income.
In all four regions, the value of that ratio is larger than one, indicating that average income is larger than typical income. Moreover, that ratio is increasing in value over time, suggesting one of the following is happening: (1) rich families are becoming relatively richer, (2) poor families are becoming relatively poorer, (3) both (1) and (2) are happening at the same time in different proportions.
However, the trend of increasing family income inequality hasn’t followed the same pattern across all regions: It was slower to pick up in the Midwest, where it caught up to the rest of the country only in 2020. More data are needed to determine if this increased Midwestern family income inequality is permanent. Finally, the patterns discussed above also describe the evolution of mean and median personal income by region.
*See this map to find out which Census region you live in.
How this graph was created: Search for and select “Real Mean Personal Income in Midwest Census Region.” Next, customize the data by searching for and selecting “Real Median Personal Income in Midwest Census Region.” Next, create a custom formula to combine the series by typing in “a/b” and clicking “Apply.” Click the “Add Line” tab and repeat the previous three steps to add the data from the other three U.S. Census regions to the graph.
Suggested by Diego Mendez-Carbajo.