Asian Americans are one of the poorest ethnic groups in the US — they would benefit from progressive policies that provide an economic safety net

Income Inequality in the U.S. Is Rising Most Rapidly Among Asians Asians displace blacks as the most economically divided group in the U.S. BY RAKESH KOCHHAR AND ANTHONY CILLUFFO From lowest to highest: Income inequality in U.S. increased most among Asians from 1970 to 2016Income inequality, a measure of the economic gap between the rich and poor, has risen steadily in the United States since the 1970s. More recently, the issue burst into public consciousness with the Occupy Wall Street movement in 2011 and subsequent calls for a $15 minimum wage. An important part of the story of rising income inequality is that experiences within America’s racial and ethnic communities vary strikingly from one group to the other. Today, income inequality in the U.S. is greatest among Asians. From 1970 to 2016, the gap in the standard of living between Asians near the top and the bottom of the income ladder nearly doubled, and the distribution of income among Asians transformed from being one of the most equal to being the most unequal among America’s major racial and ethnic groups. In this process, Asians displaced blacks as the most economically divided racial or ethnic group in the U.S., according to a new Pew Research Center analysis of government data. While Asians overall rank as the highest earning racial and ethnic group in the U.S., it is not a status shared by all Asians: From 1970 to 2016, the gains in income for lower-income Asians trailed well behind the gains for their counterparts in other groups. An increase in income inequality matters because of the potential for social and economic consequences. People at the lower rungs of the income ladder may experience diminished economic opportunity and mobility and have less political influence. Researchers have also linked growing inequality to greater geographic segregation by income. In addition, there is evidence that rising inequality may harm overall economic growth by reducing consumption levels, causing excessive borrowing by lower- to middle-income families, or limiting investment in education. The income gap between Americans at the top and the bottom of the income distribution widened 27% from 1970 to 2016. Among all Americans, those near the top of the income ladder had 8.7 times as much income as those near the bottom in 2016, $109,578 compared with $12,523. In 1970, Americans near the top had 6.9 times as much income as those near the bottom, $63,512 compared with $9,212. (All income estimates are adjusted for household size and expressed in 2016 dollars.) This measure of inequality, known as the 90/10 ratio, takes the ratio of the income needed to place among the top 10% of earners in the U.S. (the 90th percentile) to the income at the threshold of the bottom 10% of earners (the 10th percentile).1 It is a simple measure of the gap in income between the top and the bottom of the income ladder and is commonly used by researchers and government agencies. (See text box for more on measuring inequality.) The 90/10 ratio varies widely by race and ethnicity. In 2016, Asians at the 90th percentile of their income distribution had 10.7 times the income of Asians at the 10th percentile. The 90/10 ratio among Asians was notably greater than the ratio among blacks (9.8), whites (7.8) and Hispanics (7.8). This pattern of inequality across groups represents a significant shift from the past. In 1970, the 90/10 ratio among Asians was 6.1, about as low as among whites (6.3). But the top-to-bottom gap in income among Asians increased 77% from 1970 to 2016, a far greater increase than among whites (24%), Hispanics (15%) or blacks (7%).2 This marked difference in the growth in inequality reflects the fact that Asians near the top experienced more growth in income from 1970 to 2016 than any other group while Asians near the bottom experienced the least growth. Measuring inequality Most Asian adults in the U.S. are foreign born The Asian experience with inequality is partly driven by immigration.3 Immigrants accounted for 81% of the growth in the Asian adult population from 1970 to 2016, and the foreign-born share among Asians increased from 45% to 78% in this period.4 The surge in Asian immigration followed the Immigration and Nationality Act in 1965, which favored family reunification, and the end to the war in Vietnam in 1975, which brought in a wave of refugees. One result was that the share of new Asian immigrants working in high-skill occupations decreased from 1970 to 1990, and the share working in low-skill occupations increased.5 More recently, the Immigration Act of 1990 sought to increase the inflow of skilled immigrants. Coinciding with a boom in the technology sector, a new wave of Asian immigrants, many from India, followed under the auspices of the H-1B visa program. Thus, since 1990, there has been an increase in the share of Asian immigrants employed in high-skill occupations. Education levels and incomes vary widely among Asians living in the U.S. In 2015, the share with at least a bachelor’s degree, among adults ages 25 and older, ranged from 72% among Indians to 9% among Bhutanese, median household income varied from $100,000 among Indians to $36,000 among Burmese, and poverty rates ranged as high as 35% among the Burmese and 33% among the Bhutanese.6 This diversity in their origins and experiences is reflected in the relatively high level of income inequality among Asians. These are among the key findings from a new Pew Research Center analysis of American Community Survey (ACS) data from the U.S. Census Bureau in conjunction with decennial census data. The period of analysis is 1970 to 2016, from the decade marking the rise in inequality in modern times to the latest available data. The sample for the analysis is the U.S. adult, civilian household population, with some omissions.7 The focus of this report is on income inequality within the major racial and ethnic communities in the U.S., and on the gaps in income across people in these groups at the bottom, middle and upper points of the income distribution. Income inequality is measured using the 90/10 income ratio and the Gini coefficient (see text box). The term “income” in this report refers to what is afforded a person by the combined resources of his or her household, whether the person had personal earnings or not. Thus, people’s incomes are represented by their household’s income adjusted for household size.8 All members of a household have the same income, or standard of living.9 The standard of living of lower-income Asians stagnated from 1970 to 2016 Incomes increased most for higher-income Asians, least for lower-income AsiansAs evidenced by the rise in inequality from 1970 to 2016, higher-income adults in the U.S. experienced more of an increase in income than lower-income adults within all racial and ethnic groups, and this disparity was most pronounced among Asians. The income of higher-income Asians – those at the 90th percentile – nearly doubled from 1970 to 2016, rising 96%. Asians at the median-income level (50th percentile) experienced a 54% increase in income. But the income of Asians at the 10th percentile increased only 11% over this period. Thus, inequality among Asians increased overall as those at the top of the income ladder pulled away from those at the middle and bottom, and Asians at the middle also pulled away from those near the bottom. Moreover, the gains for lower-income Asians lagged behind the gains for lower-income blacks (67%), whites (45%) and Hispanics (37%). Whites, blacks and Hispanics at the 90th percentile also experienced relatively large gains in income (80%, 79% and 58% respectively). These improvements in the standard of living were greater than the gains at the median: 52% for whites, 66% for blacks and 36% for Hispanics. Lower-income whites, blacks and Hispanics, while losing ground to those at the top, mostly kept pace with those at the middle of their income distributions. The trends in income growth also show that blacks made some progress in closing the gap with whites. Blacks at the median and at the 10th percentile experienced more of an increase in income than similarly situated whites, and blacks at the 90th percentile kept pace with whites.10 Hispanics experienced smaller increases in income than whites at all percentiles, however. Thus, lower-, middle- and upper-income Hispanics all lost ground to their white counterparts from 1970 to 2016. As it has with Asians, immigration has been an important part of the Hispanic experience in recent decades. In 2016, 47% of adult Hispanics were foreign born, up from 34% in 1970. The inflow of immigrants accounted for 50% of the total increase in the Hispanic adult population from 1970 to 2016 and was tilted to the lower ends of the income distribution.11 In 2015, 47% of foreign-born Hispanics 25 and older had not graduated from high school, compared with 13% of Americans overall of this age. The influx of lower-skill, lower-income immigrants likely exerted a drag on the measured growth in income for Hispanics. The majority of Asians have a higher standard of living than other groups, but some lag behind Asians have the highest earnings, except among lower-income adultsDifferences in income within racial and ethnic groups are not the only sources of inequality in the U.S., of course. The gaps in the standard of living across whites, blacks, Hispanics and Asians are also sizable and longstanding. These gaps are usually measured through differences in the mean or median incomes of groups.12 However, the sizes of the gaps are different at different tiers of the income ladder. In 2016, Asians at the middle of their income distribution earned more than white, black or Hispanic adults at the middle of their income distributions. The median annual income for Asian adults was $51,288, compared with $47,958 for whites, $31,082 for blacks and $30,400 for Hispanics (incomes are adjusted for household size and expressed in 2016 dollars). Asians also held the edge in standard of living over other groups at the top of the income distribution. The income of Asians at the 90th percentile was 13% higher than the income of whites at the 90th percentile in 2016, $133,529 versus $117,986. Upper-income blacks ($80,502) and Hispanics ($76,847) had a similar standard of living in 2016, and both were outdistanced by Asians and whites by a wide margin. In contrast, lower-income Asians lagged behind lower-income whites. Asians at the 10th percentile of their income distribution lived on $12,478 in 2016, 17% less than the income of whites at the 10th percentile ($15,094). Lower-income blacks and Hispanics trailed by even more, with incomes of $8,201 and $9,900, respectively. Income inequality and income gaps: Two windows into the well-being of racial and ethnic groups The state of income inequality within racial and ethnic groups and the gaps in incomes across them provide complementary, yet distinct, insights into the well-being of these groups of Americans.13 The fact that inequality increased within each racial and ethnic group shows that no community was immune to the factors said to have raised U.S. inequality since 1970. These factors include technological change, globalization, the decline of unions and the eroding value of the minimum wage. At the same time, the drivers of income inequality appear to have had a disproportionate impact on some racial and ethnic groups, as evidenced by the differences in the level of inequality and the degree to which it increased for each group. That could be because of differences in the characteristics of workers, such as educational attainment (greater among Asians and whites) and the share foreign born (greater among Asians and Hispanics). Also, larger societal forces may have affected some groups more than others, such as the disparately high rate of incarceration among black men (see text box). The aforementioned differences in worker characteristics also contribute to the gaps in incomes across racial and ethnic groups. In addition, the historical legacy and current impact of discrimination are considered to be important factors in these gaps. Some scholars hold the view that discrimination not only distorts the hiring practices of employers but also contributes to gaps in skills across groups, disadvantaging racial minorities prior to their entry into the labor market. It is worth noting that overall income inequality in the U.S. would persist even if the gaps in income across racial and ethnic groups were eliminated. For example, suppose that blacks, Hispanics and Asians had the same income distribution as whites. In that case, everyone at any given rung of the income ladder – lower, middle or upper – would have the same income regardless of race or ethnicity. However, the 90/10 ratio for the U.S. would fall only from 8.7, its actual level, to 7.8, the level that currently prevails among whites.14 Conversely, easing income inequality within racial and ethnic groups may have little impact on the gaps across groups. Suppose that incomes at the lower rungs of the ladder are raised 10% and incomes at the top are reduced 10%. This would reduce inequality overall and within each group, but the gaps in income across groups would be unchanged. Inequality in the U.S. is higher than in other advanced economies Inequality in the U.S. is highest among G-7 countriesThe level of inequality in the U.S., and the fact that it is comparable with the levels that existed in the 1920s by at least one measure, is of concern to many. Then-Federal Reserve Chair Janet Yellen remarked in 2014, “The extent of and continuing increase in inequality in the United States greatly concern me.” But others are more sanguine, arguing that the trends in U.S. inequality do not constrain opportunities for those at the bottom of the income distribution. In the midst of this debate, it is worth noting that income inequality in the U.S. is higher than among other advanced economies and has also increased more rapidly in recent decades. Cross-national comparisons of income inequality are often based on the Gini coefficient, a widely used measure of inequality (see text box). The Gini coefficient in the U.S. stood at 0.435 in 2016 (based on gross income and on a scale of 0 to 1), according to the Organization for Economic Cooperation and Development (OECD).15 This was the highest of any of the G-7 countries, which ranged from 0.330 in France to 0.388 in the UK. Indeed, OECD estimates show that the Gini coefficient for the U.S. is closer to the Gini for India (0.495) than to most of the G-7 countries. The level of inequality in the U.S. is also higher than the level of inequality in other OCED countries, with the exceptions of Chile, Mexico and Turkey.16 Globally, inequality is highest in countries in southern Africa (Gini coefficients of about 0.6) and lowest in eastern Europe and parts of northern Europe (Gini coefficients of about 0.25), according to World Bank estimates. Incarceration and economic inequality From 1970 to 2016, income growth skews to the top, more so among Asians Nationally, incomes near the top are rising at twice the rate of incomes near the bottomAmong Americans overall, those at the 90th percentile of the income distribution earned $109,578 in 2016. That compared with $43,049 at the median (the 50th percentile) and $12,523 at the 10th percentile. The income at the 90th percentile in 2016 was 73% higher than in 1970, compared with an increase of 44% in the median income and an increase of 36% in the income at the 10th percentile. (Incomes are adjusted for household size and expressed in 2016 dollars.) The pattern observed nationally is also present among whites, blacks, Hispanics and Asians, but to varying degrees. Whites at the 90th percentile of their income distribution earned $117,986 in 2016. Meanwhile, the median income for whites was $47,958 and their income at the 10th percentile was $15,094. From 1970 to 2016, the 90th percentile income for whites increased 80%, notably greater than the increase of 52% at the median and an increase of 45% at the 10th percentile. Changes in income at the various points of the income distribution were somewhat more balanced among blacks. For blacks, the income at the 90th percentile was $80,502 in 2016, compared with $31,082 at the median and $8,201 at the 10th percentile. Compared with 1970, these income levels represented an increase of 79% at the 90th percentile, 66% at the median, and 67% at the 10th percentile. Income growth was greatest near top for whites and blacks, but middle- and lower-income whites lagged behind more than middle- and lower-income blacks did Hispanic incomes increased less than for most other groups; Asians at the top saw their income increase the most of any group, the least near the bottom Income growth for Hispanics lagged behind the growth for other racial and ethnic groups at most points of the income distribution. In 2016, Hispanics at the 90th percentile earned $76,847, some 58% more than in 1970. The income of Hispanics at the median stood at $30,400 in 2016, up 36% from 1970. Meanwhile, Hispanics at the 10th percentile earned $9,900 in 2016, 37% higher than in 1970. These gains in income were less than the gains for other groups at the three points of the income distribution, except for Asians at the 10th percentile. The Asian experience is distinguished by sharp differences in the growth in incomes across the distribution. In 2016, incomes for Asians ranged from $12,478 at the 10th percentile to $133,529 at the 90th percentile, with a median of $51,288. The income at the 90th percentile of the Asian income distribution in 2016 was roughly double the income at that percentile in 1970, rising 96% over the period. That stood in sharp contrast with the growth at the median (54%) and at the 10th percentile (only 11%). Income growth slowed for all from 2000 to 2016, but income inequality continued to rise Income growth slowed this century for all income tiersA hallmark of income growth in the U.S. this century is the marked slowdown that ensued with the economic recession in 2001 and the Great Recession of 2007-09. This slowdown affected people in all racial and ethnic groups and at all rungs of the income ladder. Nationally, the income at the 90th percentile increased 65% from 1970 to 2000, but it increased only 4% from 2000 to 2016. Likewise, the median income in the U.S. increased 47% from 1970 to 2000, compared with a decrease of 2% from 2000 to 2016. At the 10th percentile, an increase of 53% from 1970 to 2000 was followed by a decrease of 11% this century. The two periods are of different durations, of course. But the decrease in total growth at any percentile is well in excess of what the difference in years might explain. For example, the average annual rate of growth at the 90th percentile was 1.7% from 1970 to 2000 and fell to 0.3% from 2000 to 2016.17 The trend observed nationally repeated within each racial and ethnic group. Among Asians, for instance, the income at the 90th percentile increased 16% from 2000 to 2016, compared with 69% from 1970 to 2000; the median income increased 7% this century, compared with 44% from 1970 to 2000; and the income at the 10th percentile decreased 3% from 2000 to 2016, compared with an increase of 14% in the earlier period. The slowdown in income growth this century did not alter the general trajectory toward a rise in income inequality, however. Those at the top of the economic ladder fared better than those at the bottom through the economic slowdowns this century. The one exception was among blacks, with those at the 10th percentile experiencing slightly higher growth in income from 2000 to 2016 than those at the 90th percentile, 4% compared with 1%. The slowdown in income growth this century affected all racial and ethnic groups Following a rapid increase from 1970 to 2016, income inequality is highest among Asians Income inequality is highest among AsiansAsians are the highest-earning racial and ethnic group in the U.S., on average.18 However, their overall prosperity conceals a wide and rapidly growing economic divide between higher- and lower-income Asians. As noted, Asians at the 90th percentile had an income of $133,529 in 2016, compared with $12,478 for those at the 10th percentile. Thus, in 2016, the ratio of these two incomes – the 90/10 ratio – stood at 10.7 for Asians. The level of income inequality among Asians was greater than among other racial and ethnic communities in 2016. Income inequality among blacks was the second highest – with a 90/10 ratio of 9.8 – followed by whites and Hispanics, each with a 90/10 ratio of 7.8. Nationally, the 90/10 ratio in 2016 is estimated to be 8.7.19 The pattern of inequality revealed by the 90/10 ratio is mirrored in the Gini coefficient. The Gini coefficient takes a value from 0 to 1, by construction. A value of 0 indicates a state of perfect equality, with everyone holding an equal share of aggregate income. A value of 1 implies that all income created in the economy is in the hands of one person, a state of absolute inequality. In essence, the estimated value of the Gini coefficient measures the deviation from perfect equality. (See the text box on measuring inequality.) Looking within racial and ethnic groups in 2016, the Gini coefficient for the distribution of income among Asians was 0.451, followed by blacks (0.446), whites (0.428) and Hispanics (0.425).20 Thus, as also revealed by the 90/10 ratios, Asians and blacks are more economically divided than whites and Hispanics and, in this respect, there is a meaningful degree of separation between these two pairs of racial and ethnic groups.21Income inequality is rising most rapidly among Asians Asians have not always experienced the highest level of income inequality, however. In 1970, the 90/10 ratio among Asians was 6.1, similar to the ratio of 6.3 for whites and lower than among Hispanics and blacks. But inequality among Asians increased every decade since 1970, propelling the 90/10 ratio for them to 10.7 in 2016, an increase of 77%. Blacks experienced the highest level of income inequality in 1970, and through most of the period examined. In 1970, the 90/10 ratio for blacks stood at 9.1, well above the ratios for the other groups. But after peaking around 10 in 1990, the 90/10 ratio for blacks edged down to 9.8 in 2016. Over the period from 1970 to 2016, income inequality among blacks increased only 7% by this measure. That was the smallest increase in inequality among the major racial and ethnic groups. The increase in inequality among whites and Hispanics was greater than among blacks. For whites, the 90/10 ratio increased from 6.3 in 1970 to 7.8 in 2016, a 24% increase. The 90/10 ratio for Hispanics increased from 6.7 in 1970 to 7.8 in 2016 (15%). Despite the increase, whites and Hispanics had the lowest levels of income inequality in 2016. Changes in the Gini coefficient show the same pattern of change in income inequality.22 Among Asians, the Gini coefficient increased from 0.353 in 1970, the lowest at the time, to 0.451 in 2016, the highest of all groups. A key difference is that the increase in the Gini coefficient for Asians is less than the increase in the 90/10 ratio, 28% compared with 77%. Nonetheless, the increase in the Gini coefficient for Asians was notably greater than the increase for other racial and ethnic groups. The Gini coefficient for whites increased 19%, from 0.361 in 1970 to 0.428 in 2016, followed by an increase of 14% for Hispanics, from 0.373 to 0.425, and an increase of 10% for blacks, from 0.406 to 0.446. These percentage changes are similar to the changes in the 90/10 ratios for these groups. Immigration looms large in defining the Asian experience Asians are America’s fastest growing major racial and ethnic population. The Asian adult civilian household population in the U.S. increased fourteenfold from 1970 to 2016, compared with an eightfold increase in the Hispanic population, the second-fastest growing group. The overall adult civilian household population roughly doubled from 1970 to 2016.23 The increase in the Asian population is fueled by immigration. From 1970 to 2016, immigrants accounted for 81% of the increase in the Asian adult population, and the immigrant share in the Asian population increased to 78% in 2016, from 45% in 1970.24 The change in the economic profile of the Asian population in recent decades reflects the immigrant experience to a large degree. Overall, Asian immigrants have higher levels of education than native-born Americans. In 2015, 29% of immigrants from South and East Asia,25 ages 25 and older, held a bachelor’s degree, compared with 19% of native-born Americans this age. Another 23% of these immigrants had an advanced college degree, about double the rate among native-born Americans (11%). As a result, many Asian immigrants are settling in at the top of the income distribution and likely stretching its boundaries into higher reaches. As of 2016, the foreign-born population among the top 10% of earners in the Asian income distribution had increased to 26 times what it was in 1970, compared with a nineteenfold increase in the overall Asian foreign-born population in the U.S.26 At the same time, the Asian immigrant population includes many with lower levels of education and income. From 1970 to 2016, the foreign-born population among the bottom 10% of earners in the Asian income distribution increased seventeenfold. This change is not as sharp as the change at the top of the income distribution but is of notable magnitude nonetheless.