Rising Pay Losses Among High Earners Contribute to a Narrowing of Economic Inequality in April

Updated: April 19, 2023 | By Jesse Wheeler

Source: Morning Consult Economic Intelligence. The Morning Consult/Axios Inequality Index as of April 2023, based on an average of over 260,000 survey interviews per month.

 

Each month, Morning Consult conducts over 260,000 survey interviews on a wide variety of economic and financial topics, allowing us to precisely gauge how economic inequality is shifting in response to policy developments, business conditions and current events. This data is inputted into the Morning Consult/Axios Inequality Index.

Our economic inequality index is based on four indicators: consumer confidence, employment outcomes, employment expectations and financial vulnerability. When there are larger gaps between income groups on these indicators, the level of inequality rises. A full methodology and explanation of the index is available below.

Inequality Indicators for April

Source: Morning Consult Economic Intelligence. *The Index of Consumer Sentiment is a separate index that captures consumers’ views regarding current and future personal financial conditions and business conditions in the country as a whole. Higher numbers indicate higher confidence.

The Morning Consult/Axios Inequality Index fell from 5.1% in March to 4.6% in April, indicating a narrowing of economic inequality. A major driver of this shift was a substantial increase in the share of high earners who experienced pay or income losses over the past two months.

ANALYSIS OF THIS MONTH'S DATA

  • The gap in employment outcomes between low and high earners continued to narrow in April as the share of U.S. adults from high-income households who experienced a loss of pay or income rose for a second consecutive month. In April, 9.9% of U.S. adults from households earning $100,000 or more annually reported experiencing a loss of income, compared with 8.2% in March and 6.9% in February. Meanwhile, the share among low-income households rose much more modestly, from 11.0% in February to 11.5% in April. 
  • The sharp rise in the incidence of lost pay in high-income households is a potential warning sign for the U.S. economy at a time when rising interest rates and banking sector turmoil have increased borrowing costs. High-paying tech and financial services companies have been reprioritizing projects and shedding workers to prepare for a lower-growth environment, while demand for lower-paid, in-person service workers remains robust, begging the question: Could the peculiarities in the labor market caused by the pandemic mean that a downturn in this business cycle will hit white-collar workers harder than blue-collar workers?
  • Job loss expectations remained elevated in April after shooting higher last month during the height of the banking sector crisis. While the gap between income brackets narrowed this month, job loss fears remained higher among high-income workers than their lower-income counterparts, with 18.0% of employed U.S. adults from households earning $100,000 or more expecting a loss of employment income in April, compared with 16.7% of those from households earning less than $50,000. 
  • Financial vulnerability, measured by the share of respondents who would be unable to cover their basic expenses for a month with savings alone, rose to 24.4% in April, after a cash injection from annual tax returns helped bring the share down to an eight-month low of 22.8% in March. Among low-income households, 30.7% of adults said they lacked sufficient savings to cover a month of basic expenses.
  • Despite convergence on employment outcomes and expectations, the gap in consumer sentiment between high- and low-income Americans widened, with April’s 14.8-point difference the largest since February 2022. While consumer confidence rose among higher earners — buoyed in part by financial market strength — Morning Consult’s Index of Consumer Sentiment fell slightly overall from March to April as uncertainty around the impact of the banking sector crisis weighed heavily on confidence.

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CONSUMER CONFIDENCE

Consumer confidence is measured using Morning Consult’s Index of Consumer Sentiment, which captures consumers’ views regarding current and future personal financial conditions and business conditions in the country as a whole.

Source: Morning Consult Economic Intelligence

LEVEL OF INEQUALITY

The level of inequality in consumer confidence reflects the standard deviation of consumer confidence across low-, middle- and high-income adults.

Source: Morning Consult Economic Intelligence

EMPLOYMENT OUTCOMES

Employment outcomes reflect the share of adults who experienced a loss of pay or income during the prior month.

Source: Morning Consult Economic Intelligence

LEVEL OF INEQUALITY

The level of inequality in employment outcomes reflects the standard deviation of the share of adults who experienced a loss of pay or income across low-, middle- and high-income adults.

Source: Morning Consult Economic Intelligence

EMPLOYMENT EXPECTATIONS

Employment expectations reflects the share of employed workers who expect to experience a loss of pay or income in the next four weeks.

Source: Morning Consult Economic Intelligence

LEVEL OF INEQUALITY

The level of inequality in employment expectations reflects the standard deviation of the share of employed adults who expect to experience a loss of pay or income in the next four weeks across low-, middle- and high-income adults.

Source: Morning Consult Economic Intelligence

FINANCIAL VULNERABILITY

Financial vulnerability reflects the share of adults who say they have only enough savings to cover less than a month’s worth of basic expenses, were they to lose their income.

Source: Morning Consult Economic Intelligence

LEVEL OF INEQUALITY

The level of inequality in financial vulnerability reflects the standard deviation of the share of adults unable to pay their basic expenses for a full month using just their savings across low-, middle- and high-income adults.

Source: Morning Consult Economic Intelligence

ABOUT

Methodology:

The Morning Consult/Axios Inequality Index relies on Morning Consult’s proprietary survey research capabilities to collect the four data series that feed into the index.

Monthly Sample Size (May 2020 – April 2023)

Index of Consumer Sentiment – 102,558

Lost pay/income tracker – 70,140

Employment expectations – 1,182

Financial vulnerability – 2,207

Index Calculation:

1. Convert daily and weekly values to monthly values. The index averages weekly values for the lost pay/income tracker and daily values for the Index of Consumer Sentiment to produce monthly values.

2. Convert Index of Consumer Sentiment values to net percentages. The Index of Consumer Sentiment is on a scale from 0 to 200 while the other three series are percentages that run from 0 to 100 percent. This difference in units prevents direct comparison of the four components and limits the ability to combine them into a single inequality index. In order to address this issue, the ICS values have to be reduced by 100 and divided by 100 so that they reflect net percentages.

3. Calculate each of the four components. Each of the component series is calculated by taking the standard deviation of the three values across the income spectrum. The resulting values represent the degree of variation or dispersion from the mean among low-, middle- and high-income adults. The higher the component value, the greater the inequality across income groups.

4. Calculate the overall index. The Morning Consult/Axios Inequality Index is an average of the four component values. The higher the index value, the greater the inequality across income groups.

About Morning Consult

Morning Consult is a global decision intelligence company changing how modern leaders make smarter, faster, better decisions. The company pairs its proprietary high-frequency data with applied artificial intelligence to better inform decisions on what people think and how they will act. Learn more at morningconsult.com.

Email press@morningconsult.com to speak with a member of the Morning Consult team.

Correction: A previous version of this page included incorrect March figures for the Inequality Index, as well as for pay loss trends, due to a data collection error. It has been updated to reflect the correct numbers.

FAQs

1. What is the Morning Consult/Axios Inequality Index?

The Morning Consult/Axios Inequality Index measures economic inequality across income groups on a monthly basis.

2. How does the Morning Consult/Axios Inequality Index define economic inequality?

The Morning Consult/Axios Inequality Index defines economic inequality in terms of consumer confidence, employment outcomes, employment expectations and financial vulnerability, each of which plays an equally important role in capturing the economic experiences of adults across the income spectrum.

3. Why is it important to measure economic inequality?

Traditional economic indicators provide limited insight into the ways in which different groups of adults are experiencing the economy, thereby increasing the risk of economic policies leaving behind certain groups of individuals.

Persistent or increasing economic inequality casts doubt on the fairness of America’s economic system and undermines the sustainability of economic growth.

4. How does the index compare to the Gini coefficient?

Unlike the Gini coefficient, the Morning Consult/Axios Inequality Index does not measure the distribution of income or wealth in the country. Rather, it measures the impact of income differences on driving differences in economic experiences.

5. How are Morning Consult and Axios planning on measuring and analyzing other forms of economic inequality not included in the index?

Morning Consult and Axios are both committed to measuring and analyzing additional forms of economic inequality not explicitly included in the index, including issues related to wealth disparities and intergenerational economic mobility. These additional forms of economic inequality exist not only across income groups, but also by race, ethnicity, gender, educational attainment and parental status, to name a few. Future monthly releases will highlight some of these additional disparities in economic experiences via special reports and analysis.

6. How is the data for the Morning Consult/Axios Inequality Index collected?

The Morning Consult/Axios Inequality Index relies on Morning Consult’s proprietary survey research capabilities to collect the four data series that feed into the index.

7. How should the index values be interpreted?

The values of the Morning Consult/Axios Inequality Index answer the question “how differently are U.S. adults with annual incomes below $50,000, between $50,000 and $100,000 and over $100,000 experiencing the economy?” The higher the index value, the more differently adults across the income spectrum are experiencing the economy.

8. How often will the index be published?

The Morning Consult/Axios Inequality Index will be published on a monthly basis during the last two weeks of the month.

Morning Consult