Trends in the Family Income Distribution by Race/Ethnicity and Income Source, 1988-2009

The recent dramatic rise in U.S. income inequality has prompted a great deal of research on trends in overall family income and changes in sources of family income, especially among the highest income earners. However, less is known about changes in sources of income among the bottom 99% or about racial/ethnic differences in those trends. The present research contributes to the literatures on income trends and racial economic inequality by using family-level data from the 1988-2009 Current Population Survey to examine changes in overall family income and the proportion of income coming from employment, property/assets, and transfers across five different levels of family income for white-, black-and Hispanic-headed families. We find that at all income levels above the 25th percentile, employment income is by far the largest contributor to family income for all racial/ethnic groups. Employment income trended upward over the period in both real dollars and as a percentage of total family income. In this respect, white, black and Hispanic families are remarkably similar. The racial gap in total family income has remained fairly stable over the period, but this trend conceals a narrowing of racial differences in property income, mostly as a function of the decline in property income among whites, a widening of racial differences in transfer income among the bottom 25%,and a widening of racial differences in employment income, particularly at the top of the family income distribution. Income accrued from wealth is a very small component of overall family income for all three racial groups, even for the highest-income families (top 1%).