Inequality in 3D: Income, consumption, and wealth

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Authors:

Jonathan Fisher, Research Scholar, Stanford Center on Poverty and Inequality
David Johnson, Research Professor, Survey Research Center, Institute
for Social Research, University of Michigan, Law School
Timothy Smeeding, Lee Rainwater Distinguished Professor of Public Affairs
and Economics, University of Wisconsin-Madison
Jeffrey Thompson, Principal Economist, Board of Governor of the Federal Reserve System

Updated December 2017

Abstract:

We do not need to and should not have to choose amongst income, consumption, or wealth as the superior measure of well-being. All three individually and jointly determine well-being. We are the first to study inequality in three conjoint dimensions for the same households, using income, consumption, and wealth from the 1989-2016 Surveys of Consumer Finances (SCF). The paper focuses on two questions. What does inequality in two and three dimensions look like? Has inequality in multiple dimensions increased by less, by more, or by about the same as inequality in any one dimension? We find an increase in inequality in two dimensions and in three dimensions, with a faster increase in multi-dimensional inequality than in one-dimensional inequality. Viewing inequality through one dimension greatly understates the level and the growth in inequality in two and three dimensions. The U.S. is becoming more economically unequal than is generally understood. JEL Codes: D31, E21, I31.