The New American Economy: A Rising Tide that Lifts Only Yachts

With respect to income inequality, research using data from the Luxembourg IncomeStudy reveals that, while a family in the United States with the median income is well offby international standards, low-income families here have slightly less purchasing powerthan the poor in mostother advanced economies.Figure 5 shows themean income of those inthe top 10 percent of theincome distribution, thosein the bottom 10 percent,and the median incomefor six European countries,Canada, and the UnitedStates (all income levelsare presented as a percentof the U.S. median incomeso that they can be easilycompared). In Sweden, thecountry in the figure withthe least income disparity,the high-income segmentof the population is onlya little better off than theU.S. median, yet the poorin Sweden have higherpurchasing power than thepoor in the United States.Income as percentage of U.S. median income250200150100500SwedenFigure 5. Income at Various Points in the Distributionin the 1990sHigh incomeMedian incomeLow incomeNetherlandsNorwayGermanyFranceUnited KingdomCanadaUnited StatesSource: Timothy M. Smeeding and Lee Rainwater, Comparing Living StandardsAcross Nations: Real Incomes at the Top, the Bottom, and the Middle, LuxembourgIncome Study, Working Paper 266, February 2002, available online at http://www.sprc.unsw.edu.au/dp/DP120.pdf.