Timothy M. Smeeding

Empirical Evidence on Income Inequality in Industrialized Countries

This chapter reviews the evidence on cross-national comparisons of annual disposable income inequality in over 20 wealthy nations. We begin by reviewing a number of conceptual and measurement issues which must be addressed by any cross-national comparison of survey-based household income data. With these caveats in mind, we present data on both the level of inequality during the early to mid-1990s, and in inequality trends since 1970. While most comparisons are made in terms of relative incomes within nations, we also make some real income comparisons at a point in time using purchasing power parities. The data indicate that a wide range of inequality exists across these rich nations during this decade, with the most unequal nation experiencing a level of inequality which is more than twice the level found in the most equal nation. Country specific trends in income inequality are more similar, although not universally so. The large majority of nations have experienced rising income inequality over the last decade or longer. This increase is not offset by changes in income mobility over this period, and follows a period of declining income inequality in most of these same nations.

“Fair” Inequality? Attitudes toward Pay Differentials: The United States in Comparative Perspective

Are American attitudes toward economic inequality different from those in other countries? One tradition in sociology suggests American “exceptionalism,” while another argues for convergence across nations in social norms, such as attitudes toward inequality. This article uses International Social Survey Program (ISSP) microdata to compare attitudes in different countries toward what individuals in specific occupations “do earn” and what they “should earn,” and to distinguish value preferences for more egalitarian outcomes from other confounding attitudes and perceptions. The authors suggest a method for summarizing individual preferences for the leveling of earnings and use kernel density estimates to describe and compare the distribution of individual preferences over time and cross-nationally. They find that subjective estimates of inequality in pay diverge substantially from actual data, and that although Americans do not, on the average, have different preferences for aggregate (in)equality, there is evidence for:

Time Use at Older Ages Cross-National Differences

This article analyzes patterns of time use of older adults in the following nine countries: Austria, Canada, Finland, Germany, Italy, the Netherlands, Sweden, the United Kingdom, and the United States. Using time-use surveys carried out in these countries between 1987 and 1992, the article describes country-level variations in the aggregate patterns of time use of older adults and examines changes in the patterns of time use associated with aging. The results suggest that there are large cross-national differences in the patterns of time use of older adults but remarkable similarities in the age patterns of activities. Results also suggest that a large fraction of time freed up by retirement from the labor market is reallocated to passive activities.

Globalization, Inequality, and the Rich Countries of the G-20: Evidence from the Luxembourg Income Study (LIS)

The purpose of this study is to summarize and comment upon what we know about the determinants of both the level and trend in economic inequality over the past two decades, and to relate these findings to the progress of globalization in these nations. While the fruits of economic progress in rich nations have not been equally spread, we argue that most citizens inrich Organization for Economic Cooperation and Development (OECD) nations have benefited from the trend toward global economic progress. We begin with a summary of the differences in overall economic inequality within the G-20 nations based on LIS (Luxembourg Income Study) data and recent work by others. Here we find that social policies, wage distributions, time worked, social and labor institutions, and demographic differences all have some influence on why there are large differences in inequality among rich nations at any point in time. In contrast, trade policy has not been shown to have any major impact on economic inequality. Next we turn to trends in inequality. We find modest and sometimes dissimilar changes in the distribution of income have taken place within most advanced nations, with most finding a higher level of inequality in the mid to late 1990s than in the 1980s. Inequality, however, has not risen markedly in some nations (e.g., Denmark, Germany, France, and Canada) over this period, while its rise has slowed in several other nations during the late 1990s. The explanations for rising inequality in rich countries are many, and no one single set of explanations is ultimately convincing. In particular, there is no evidence that we know of that trade and globalization is bad for rich countries. This suggests that rising economic inequality is not inevitable, or that it necessarily hurts low-skill, low-income families. Rather, it suggests that globalization does not force any single outcome on any country. Domestic policies and institutions still have large effects on the level and trend of inequality within rich and middle-income nations, even in a globalizing world economy.

Changing Income Inequality in OECD Countries: Updated Results from the Luxembourg Income Study (LIS)

The purpose of this study is to update the results first presented in 1995 in the OECD Monograph, “Income Distribution in OECD Countries: Evidence from the Luxembourg Income Study” by Atkinson, Rainwater, and Smeeding (1995). Though only five years have passed since the publication of this volume, we are now able to compare the level of disposable income inequality across 20 nations, including Germany, in three separate periods using US. Moreover, we are now able to use several sets of national data to assess the changes in inequality that have taken place in recent years. The brief results are that the ranking of nations by the level of inequality at a point in time are more or less the same regardless of the year of comparison from roughly 1980-1997. But large changes in the distribution of income have taken place within many nations, with most finding a higher level of inequality in the mid-to-late 1990s than in the 1980s, and with Western Germany being no exception. Inequality, however, has not risen in Denmark or in Canada over this period, while its rise has slowed in several nations. This suggests that rising economic inequality is not inevitable. Strategies for improving these estimates are also discussed.

The gender gap in poverty in modern nations: Single motherhood, the market, and the state

In this article we examine gender gaps in poverty in the United States and seven other Western nations, asking how single motherhood, market earnings, and welfare states affect gender inequality in poverty. Our analyses speak to the theoretical literature emphasizing the gendered logic and effects of welfare states and labor markets. We find that single-mother families have higher poverty rates than other families in all nations except Sweden, though the degree of their poverty varies. Regarding welfare states, we find that the tax and transfer systems in Sweden and the Netherlands most effectively reduce gender inequality in poverty. Gender inequality in market earnings is worst in the Netherlands and Australia, though among full-time workers, Australia has the lowest gender gap. We conclude by discussing the policy issues raised by our findings.

The Shifting Incidence of Involuntary Job Losses from 1968 to 1992

Risks of involuntary job losses among male workers are examined with data spanning 1968 to 1992 from the Panel Study of Income Dynamics. We find that the incidence of involuntary job losses among prime-age men with strong links to the labor market rose substantially over the period under investigation and about as much for college-educated and older workers as for less educated and less experienced workers. The only labor market group not sharing the burden of higher job-loss risks were government workers. Overall, involuntary job losses were distributed more evenly across skill groups during periods of macroeconomic expansion than during periods of contraction.

Poor Children in Rich Countries

Why are children in the US are so poor compared to their peers in other countries both before and after they receive government transfer benefits? To a data on this question the poverty rates and gaps of families with children both before and after income transfers in 6 industrial countries is presented. 2 factors are compared cross-nationally that may contribute to the relatively high pre-tax and transfer poverty in the US -- the difference in earnings and the differences in family structure. The countries are Australia Canada Germany Sweden and the UK in addition to the US. The cross-national comparison shows that poor families in the US have lower earnings than the families in other countries except Australia and that countries with highest means-tested income transfers to poor families had the lowest earnings. The US also had more children in 1-parent families which have lower earnings than 2-parent families. 2 additional factors were compared that may contribute to the relatively high poverty in the US after tax transfers -- program participation and the level of income support. All poor families in other countries receive income support but only 73% of US poor families receive help. Further the income help the US poor families receive is less than in any other country. The data for families and children comes from the Luxembourg Income Study (LIS). Between 1979-82 9 countries conducted national households surveys that collected detailed income data and the data were adjusted for definitional differences of both income and income sharing units. Since the 1979-81 period focused on in this paper the problems of child poverty have intensified. In the US child poverty has increased from 17.1 to 21.2% in 1985. In the European nations a new poverty has development that almost certainly has increased the poverty of their children yet US children are likely to remain disadvantaged relative to their peers. To the extent that poverty of children relates to their poverty as adults the quality of the US workforce in the future surely will suffer because of present poverty and the poverty of the countrys children will undermine long-term competitiveness with other wealthy countries who tolerate considerable less child poverty than does the US.

The Cost of Caring: Childhood Disability and Poor Families

Children in poor families are at heightened risk for disabilities and chronic health problems, and care for these children can impose substantial costs on families and public programs. Although the prevalence and costs of disabilities among poor children have important policy implications, they have been largely overlooked in research on poverty and welfare and on the costs of childhood disabilities. This article analyzes the prevalence of childhood disabilities and chronic illness among welfare recipient families in California and the probability families caring for these children experience higher out‐of‐pocket costs and material hardship than do other similar families.

Poverty, Inequality, and Income Distribution in Comparative Perspective: The Luxembourg Income Study (LIS)

The Luxembourg Income Study is a unique database that makes possible comparisons between countries at the individual and family levels. Seven countries are in the database at present, and more are being added on a regular basis. This book describes the technical and methodological aspects of the LIS database and uses LIS data to compare income distribution and redistribution, poverty, and the relationship between age and income across nations.