What Does a Widening Income Gap Mean for Individual Households?
The overall distribution for a given year is a “snapshot” of the disparity between households who happen to be low-income, middle-income, and high-income households for that particular period. For households with relatively stable income characteristics from year to year, their position in the income distribution in any one year is a good indication of where they lie in other years. Certain other households, however, can experience volatility in their year-to-year incomes, due to such factors as capital gains realizations, real property sales, inheritances, and so forth. Thus, their position in the income distribution can vary from one year to the next. For this reason, increased inequality as evidenced by a widening average income gap does not show what has been happening to specific households, and does not mean that the same households are necessarily experiencing greater income disparities over time. Taxpayers in any one income category may either remain in the same category or mov
