Trends in american living standards and inequality, 1959-2007

We analyze the trends from 1959 to 2007 using an expanded measure of income called the Levy Institute Measure of Economic Well-Being (LIMEW). LIMEW is different in scope from the official U.S. Census Bureau measure of gross money income (MI) in that our measure includes non-cash transfers, public consumption, imputed income from wealth, and household production and nets out personal taxes. While the annual growth rates of median LIMEW and MI are very close over the whole period (0.67 and 0.63 percent), median LIMEW grew much faster than median MI after 1982 and much slower before. The Gini coefficient of MI is uniformly higher than that of LIMEW but both show about the same change from 1959 to 2007. Decomposition analysis shows that changes in inequality are driven to a large extent by non-home wealth in LIMEW and earnings in MI. While the racial gap in MI declined somewhat over the 1990s and 2000s, the racial gap in LIMEW actually widened a bit. Over the same years, while there was little change in the gap in MI between the elderly and non-elderly, the LIMEW of the elderly actually overtook that of the non-elderly.