Finance and Economics Discussion Series

Inequality and Poverty in the United States: the Aftermath of the Great Recession

Jeffrey P. Thompson and Timothy M. Smeeding
2013-51

Abstract: This paper explores trends in inequality and poverty using both market and after-tax and transfer income in the period during and after the Great Recession (through 2011). Using market income (or wages), inequality and poverty rose sharply between 2008 and 2010. The primary exception is measures for the top of the distribution; annual wage and income shares of the top one percent dipped in 2008 and 2009. Including taxes and transfers, broad-based inequality measures also fell, and the poverty increase was muted. Tax and transfer policies lowered inequality and poverty, but those policies were not equal across the population. Poverty declined among the elderly, changed little among children, and rose sharply among the working-age. Inequality fell across the total population, but was unchanged among working-age households. Since 2009, as the economy has grown slowly, inequality has risen for all groups, and poverty remains high for the working-age.

Keywords: Inequality, poverty, income distribution, social welfare policy