Social Justice / Income Distribution

 

Income Distribution

 

The way that incomes are distributed can vary from community to community. Higher levels of income inequality are associated with a variety of negative community outcomes including: poor health, lower levels of social mobility, and lower levels of electoral participation.1,2

One way that the distribution of income in a community is measured is the Palma Ratio. The Palma Ratio is a measure of income inequality and represents the ratio of incomes shares of the top 10% to the bottom 40%. Increases in Palma Ratio result over time, indicate increases in inequality.

The data dashboard below shows current and recent trend data for the Palma Ratio

Dashboard: Income Distribution

Income Inequality Generally Increasing

  • Between 2006 and 2017, Forsyth County has seen a significant increase in the Palma Ratio.
Notes on Data

If you are interested in using data from this report for more rigorous purposes, please contact info@forsythfutures.org for a consultation on how best to proceed.


The Palma Ratio is derived by summing all household incomes in the top 10% and bottom 40% of the income distribution, and then dividing the summed income of the top 10% by the bottom 40%.
Household income includes all wages and salary income, self-employment income, retirement income, interest and dividends, as well as transfer payments (Supplemental Security Income, Social Security and public assistance). Federal and state income and payroll taxes were subtracted using the National Bureau of Economic Research’s TAXSIM Program1.

We also adjusted post-tax household incomes based on household size using the US Census Bureau’s equivalence scale. The equivalence2 adjustment used here is based on a three-parameter scale that reflects:

  • On average, children consume less than adults.
  • As family size increases, expenses do not increase at the same rate.
  • The increase in expenses is larger for a first child of a single-parent family than the first child of a two-adult family.

The three-parameter scale is calculated in the following way:

  • One and two adults: scale = (number of adults)0.5
  • Single parents: scale = (number of adults + 0.8*first child + 0.5*other children)0.7
  • All other families: scale = (number of adults + 0.5*number of children)0.7

  1. Feenberg, Daniel Richard, and Elizabeth Coutts. 1993. “An Introduction to the TAXSIM Model”. Journal of Policy Analysis and Management 12(1): 189-194. http://www.nber.org/taxsim/.
  2. Glassman, Brian, and Poverty Statistics Branch. “Income Inequality Metrics and Economic Well-Being in US Metropolitan Statistical Areas.”
Literature References
  1. Raphael, D. (2000). Health Inequities in the United States: Prospects and Solutions. Journal of Public Health Policy. 1(4):394-427.
  2. Solt, F. (2010). Does Economic Inequality Depress Electoral Participation? Testing the Schattschneider Hypothesis. Political Behavior. 32(2):285-301
Data Sources

U.S. Department of Commerce. (2017). Gini Index of Income Inequality: Table B19083 [Data files from ACS 1-year estimates for the year 2016]. Retrieved from https://factfinder.census.gov/faces/tableservices/jsf/pages/productview.xhtml?