Rich/poor gap smaller than it appears

"The top fifth of American households earned an average of $149,963 a year in 2006. As shown in the first accompanying chart, they spent $69,863 on food, clothing, shelter, utilities, transportation, health care and other categories of consumption. The rest of their income went largely to taxes and savings. The bottom fifth earned just $9,974, but spent nearly twice that - an average of $18,153 a year.

How is that possible? A look at the far right-hand column of the consumption chart, labeled "financial flows," shows why: those lower-income families have access to various sources of spending money that doesn't fall under taxable income. So, bearing this in mind, if we compare the incomes of the top and bottom fifths, we see a ratio of 15 to 1. If we turn to consumption, the gap declines to around 4 to 1...

Let's take the adjustments one step further. Richer households are larger - an average of 3.1 people in the top fifth, compared with 2.5 people in the middle fifth and 1.7 in the bottom fifth. If we look at consumption per person, the difference between the richest and poorest households falls to just 2.1 to 1. The average person in the middle fifth consumes just 29 percent more than someone living in a bottom-fifth household."

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Posted by John Ray