Social Inequality In Asia

[Annemie]

Inthis process, Asians displaced blacks as the most economically divided racial or ethnic group in the U.S., according to a new Pew Research Center analysis of government data. While Asians overall rank as the highest earning racial and ethnic group in the U.S., it is not a status shared by all Asians: From 1970 to 2016, the gains in income for lower-income Asians trailed well behind the gains for their counterparts in other groups.

An increase in income inequality matters because of the potential for social and economic consequences. People at the lower rungs of the income ladder may experience diminished economic opportunity and mobility and have less political influence. Researchers have also linked growing inequality to greater geographic segregation by income. In addition, there is evidence that rising inequality may harm overall economic growth by reducing consumption levels, causing excessive borrowing by lower- to middle-income families, or limiting investment in education.

This measure of inequality, known as the 90/10 ratio, takes the ratio of the income needed to place among the top 10% of earners in the U.S. (the 90th percentile) to the income at the threshold of the bottom 10% of earners (the 10th percentile).1 It is a simple measure of the gap in income between the top and the bottom of the income ladder and is commonly used by researchers and government agencies. (See text box for more on measuring inequality.)

The Asian experience with inequality is partly driven by immigration.3 Immigrants accounted for 81% of the growth in the Asian adult population from 1970 to 2016, and the foreign-born share among Asians increased from 45% to 78% in this period.4 The surge in Asian immigration followed the Immigration and Nationality Act in 1965, which favored family reunification, and the end to the war in Vietnam in 1975, which brought in a wave of refugees. One result was that the share of new Asian immigrants working in high-skill occupations decreased from 1970 to 1990, and the share working in low-skill occupations increased.5

More recently, the Immigration Act of 1990 sought to increase the inflow of skilled immigrants. Coinciding with a boom in the technology sector, a new wave of Asian immigrants, many from India, followed under the auspices of the H-1B visa program. Thus, since 1990, there has been an increase in the share of Asian immigrants employed in high-skill occupations.

These are among the key findings from a new Pew Research Center analysis of American Community Survey (ACS) data from the U.S. Census Bureau in conjunction with decennial census data. The period of analysis is 1970 to 2016, from the decade marking the rise in inequality in modern times to the latest available data. The sample for the analysis is the U.S. adult, civilian household population, with some omissions.7

As evidenced by the rise in inequality from 1970 to 2016, higher-income adults in the U.S. experienced more of an increase in income than lower-income adults within all racial and ethnic groups, and this disparity was most pronounced among Asians.

Thus, inequality among Asians increased overall as those at the top of the income ladder pulled away from those at the middle and bottom, and Asians at the middle also pulled away from those near the bottom. Moreover, the gains for lower-income Asians lagged behind the gains for lower-income blacks (67%), whites (45%) and Hispanics (37%).

Whites, blacks and Hispanics at the 90th percentile also experienced relatively large gains in income (80%, 79% and 58% respectively). These improvements in the standard of living were greater than the gains at the median: 52% for whites, 66% for blacks and 36% for Hispanics. Lower-income whites, blacks and Hispanics, while losing ground to those at the top, mostly kept pace with those at the middle of their income distributions.

The trends in income growth also show that blacks made some progress in closing the gap with whites. Blacks at the median and at the 10th percentile experienced more of an increase in income than similarly situated whites, and blacks at the 90th percentile kept pace with whites.10 Hispanics experienced smaller increases in income than whites at all percentiles, however. Thus, lower-, middle- and upper-income Hispanics all lost ground to their white counterparts from 1970 to 2016.

As it has with Asians, immigration has been an important part of the Hispanic experience in recent decades. In 2016, 47% of adult Hispanics were foreign born, up from 34% in 1970. The inflow of immigrants accounted for 50% of the total increase in the Hispanic adult population from 1970 to 2016 and was tilted to the lower ends of the income distribution.11 In 2015, 47% of foreign-born Hispanics 25 and older had not graduated from high school, compared with 13% of Americans overall of this age. The influx of lower-skill, lower-income immigrants likely exerted a drag on the measured growth in income for Hispanics.

Differences in income within racial and ethnic groups are not the only sources of inequality in the U.S., of course. The gaps in the standard of living across whites, blacks, Hispanics and Asians are also sizable and longstanding. These gaps are usually measured through differences in the mean or median incomes of groups.12 However, the sizes of the gaps are different at different tiers of the income ladder.

The state of income inequality within racial and ethnic groups and the gaps in incomes across them provide complementary, yet distinct, insights into the well-being of these groups of Americans.13 The fact that inequality increased within each racial and ethnic group shows that no community was immune to the factors said to have raised U.S. inequality since 1970. These factors include technological change, globalization, the decline of unions and the eroding value of the minimum wage.

At the same time, the drivers of income inequality appear to have had a disproportionate impact on some racial and ethnic groups, as evidenced by the differences in the level of inequality and the degree to which it increased for each group. That could be because of differences in the characteristics of workers, such as educational attainment (greater among Asians and whites) and the share foreign born (greater among Asians and Hispanics). Also, larger societal forces may have affected some groups more than others, such as the disparately high rate of incarceration among black men (see text box).

The aforementioned differences in worker characteristics also contribute to the gaps in incomes across racial and ethnic groups. In addition, the historical legacy and current impact of discrimination are considered to be important factors in these gaps. Some scholars hold the view that discrimination not only distorts the hiring practices of employers but also contributes to gaps in skills across groups, disadvantaging racial minorities prior to their entry into the labor market.

Conversely, easing income inequality within racial and ethnic groups may have little impact on the gaps across groups. Suppose that incomes at the lower rungs of the ladder are raised 10% and incomes at the top are reduced 10%. This would reduce inequality overall and within each group, but the gaps in income across groups would be unchanged.

In the midst of this debate, it is worth noting that income inequality in the U.S. is higher than among other advanced economies and has also increased more rapidly in recent decades. Cross-national comparisons of income inequality are often based on the Gini coefficient, a widely used measure of inequality (see text box). The Gini coefficient in the U.S. stood at 0.435 in 2016 (based on gross income and on a scale of 0 to 1), according to the Organization for Economic Cooperation and Development (OECD).15 This was the highest of any of the G-7 countries, which ranged from 0.330 in France to 0.388 in the UK.

Indeed, OECD estimates show that the Gini coefficient for the U.S. is closer to the Gini for India (0.495) than to most of the G-7 countries. The level of inequality in the U.S. is also higher than the level of inequality in other OCED countries, with the exceptions of Chile, Mexico and Turkey.16 Globally, inequality is highest in countries in southern Africa (Gini coefficients of about 0.6) and lowest in eastern Europe and parts of northern Europe (Gini coefficients of about 0.25), according to World Bank estimates.

Researchers interested in the economic progress of black Americans in the post-Civil Rights era have expressed concern that an increase in incarceration in recent decades may affect the estimated trends. According to them, incarceration amounts to selective removal of individuals with limited earnings potential from the labor market. This could inflate statistical measures of the economic status of a group, such as its mean income, if the potential earnings of the incarcerated population are not accounted for in the analysis.

This issue is of particular concern to researchers focused on the economic status of black men relative to that of white men. As noted in one study, the share of black men ages 25 to 54 who are institutionalized increased from 3% in 1970 to 6% in 1990. Meanwhile, the share of white men ages 25 to 54 who are institutionalized held steady at 1%.

The institutionalized population consists of people residing in correctional institutions, mental institutions, homes for the elderly and other similar institutions. Currently, public-use versions of decennial census data and American Community Survey data do not separately identify the incarcerated population. But, according to Census Bureau estimates, nearly 60% of residents of institutional facilities were in correctional institutions in 2010. This share was about 20% in 1980.

To determine the impact of incarceration, researchers generally include the institutionalized population in their analysis, assigning people in institutions a wage based on a statistical imputation of their potential labor market earnings. In effect, this amounts to the construction of a hypothetical counterfactual economy in which there is no incarceration, or no difference in incarceration rates by race and ethnicity.

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