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

Zachary Parolin, Lukas Lehner and Nathan Wilmers

Journal of Public Economics, 2025, vol. 244, issue C

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.

Keywords: Earnings inequality; Income inequality; Household composition; Secondary earners; Government transfers (search for similar items in EconPapers)
JEL-codes: D31 E01 H24 I38 J31 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:pubeco:v:244:y:2025:i:c:s0047272725000350

DOI: 10.1016/j.jpubeco.2025.105337

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