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Declining earnings inequality, rising income inequality: What explains discordant inequality trends in the United States?

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  • Parolin, Zachary
  • Lehner, Lukas
  • Wilmers, Nathan

Abstract

From 2010 to 2019, personal earnings inequality declined in the United States (U.S.) for the first time in decades, yet household income inequality continued to increase. Discordance between the inequality trends reached its highest rate in recent history. We introduce a framework to decompose differences in inequality trends. We find that 46% of post-2010 discordance in inequality trends is due to changing household composition, namely a larger share of young workers living with their parents and combining low (but increasing) personal earnings with high household incomes. The remaining discordance stems from increases in private income among higher-earning households and declining redistributive effects of government transfers. Declines in personal earnings inequality do not imply declines in household income inequality.

Suggested Citation

  • Parolin, Zachary & Lehner, Lukas & Wilmers, Nathan, 2025. "Declining earnings inequality, rising income inequality: What explains discordant inequality trends in the United States?," Journal of Public Economics, Elsevier, vol. 244(C).
    • Handle: RePEc:eee:pubeco:v:244:y:2025:i:c:s0047272725000350
    DOI: 10.1016/j.jpubeco.2025.105337
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    More about this item

    Keywords

    Earnings inequality; Income inequality; Household composition; Secondary earners; Government transfers;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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