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All US Income Groups Reach Pre-Pandemic Levels, Study Says

By Kevin Pinner · 2022-07-12 20:07:57 -0400 ·

All social groups in the U.S. recovered to pretax income levels within 20 months of the recession triggered by the COVID-19 pandemic, according to a working paper on real-time inequality tracking published by the National Bureau of Economic Research.

Real disposable income for the bottom half of earners was 20% higher in 2021 than in 2019 after accounting for taxes and cash transfers, although that figure fell this year as welfare state expansion was rolled back, according to the study, published Monday by academics at University of California, Berkeley. Thomas Blanchet, Emmanuel Saez and Gabriel Zucman co-wrote the working paper and posted their findings online at, offering what they said to their knowledge are the first statistics on the distribution of U.S. national income by race and educational attainment.

"The recovery was much more equal than the recovery from the Great Recession of 2008–2009, during which it had taken nearly 10 years for the bottom 50% to recover its pre-crisis pretax income level — even though GDP per adult recovered in four years," the study said. "The COVID recovery was also more equal across gender and racial groups."

The recovery was driven primarily by job growth during a tight labor market instead of wage growth, which "highlights the equalizing effects of tight labor markets," the study said.

It is impossible to truly know who benefits from economic growth in real time, in large part because of the American government's lack of timely information on income distributions, the authors said in slides explaining the website. The Internal Revenue Service's processing times and late filing by top earners mean income tax data is only available with a lag of nearly two years, which creates "a major gap in the economic statistics of the United States," the study said.

"These findings illustrate the fact that a given trajectory of GDP growth is compatible with widely different market income dynamics for the various social groups, highlighting the usefulness of timely distributional growth statistics," the authors said.

The study's methodology backtests accurately back to 1976 and "combines all publicly available high-frequency data in a unified framework," the study said.

The authors began by using data on the distribution of national accounts created by Saez, Zucman and Thomas Piketty in 2018, which allocates all annual national income, household wealth "and many components of these macroeconomic aggregates using primarily individual tax data," the study said.

The authors then created monthly files, rescaling each component of national income data to fit into the framework with official monthly and quarterly surveys and statistics on households, employment and wages, according to the study.

The authors matched those files to the current population survey — sponsored jointly by the U.S. Census Bureau and the U.S. Bureau of Labor Statistics — and the Federal Reserve's survey of consumer finances, they said in the study.

Based on the authors' knowledge, this allowed them to create "the first statistics on the distribution of national income by race and educational attainment," the study said.

Race and education variables "are missing in tax data," according to the study, but are included in the aforementioned surveys by federal government institutions. The framework also allowed the authors to chart high-frequency changes in employment, the study said.

The study also said labor earnings experienced significant gains at the distribution's bottom "in a context of loose monetary policy" and a tight labor market.

"Government programs enacted during the pandemic led to an unprecedented — but short-lived — improvements in living standards for the working class," the study said.

However, "disposable income fell in the beginning of 2022, as the expansion of the welfare state enacted during the pandemic — e.g., an expanded child tax credit and earned income tax credit — was rolled back," the study said. "The only reason why disposable income for the bottom 50% was higher in 2022 than in 2019 (by about 10% in real terms) was the higher market income for this group, driven by wage gains."

The authors did not immediately respond to a request for comment.

--Editing by Khalid Adad.

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