When we hear about how much more income the top 20% of households make, compared to the bottom 20% of households, one key fact is usually left out. There are millions more people in the top 20% of households than in the bottom 20% of households.
The number of households is the same but the number of people in those households is very different. In 2002, there were 40 million people in the bottom 20% of households and 69 million people in the top 20%. A little over half of the households in the bottom 20% have nobody working. You don’t usually get a lot of income for doing nothing. In 2010, there were more people working full-time in the top 5% of households than in the bottom 20%.
Mr. Perry’s expanded take on this idea:
Income inequality between the highest and lowest quintiles shrinks considerably when it’s calculated on a per-earner basis. For example, in 2014, there was more than a 16X difference between the average income of households in the top 20% (about $194,000) and the average income of the bottom quintile households ($11,676), see table. But that difference shrinks to only a 3.5X difference between the average income per earner in the top 20% (about $97,000) and the average income per earner in the bottom 20% ($27,800). Therefore, when measured this way, about 80% of the income inequality between the top and bottom 20% of US households that generates so much attention and hand-wringing disappears just by adjusting for the number of earners per household.
Here is the graph to which they refer: