The growing economic pie accrued more to low and moderate income Americans in 2018 compared to 2017. In fact, the lowest quintile of earners saw the largest income increases as a share of total income.
The largest income increases as a share of total income were experienced among low and moderate income households even when adjusting for family size.
- The lowest quintile of income earners experienced 3.3 percent and 2.9 percent increase in the share of income using the money income and equivalence adjusted income metrics, respectively.
- Meanwhile, the highest quintile experienced a 0.6 and 1.2 percent decline in the share of income using the same metrics, respectively.
The “hot” economy of 2018 drove wages up most at the lower end of the income distribution in order to attract new workers into the labor force. Often these workers filled vacancies created by people “moving up” on the job ladder. And again, those who move up are almost by definition not at the top already. One source of new workers is second earners in two-earner households. For example, the 2017 tax act meant that in 2018 a family with three children could earn up to $74,000 before they paid any income taxes. In 2017 that figure was $57,400. Second earners in two-earner households could therefore find that they could go to work and not face any federal income tax liability. The “adjusted” data show that this gain occurred as two-adult families went from one-earner to two-earner and thus enjoyed bigger percent income gains.