Income inequality: 95/20 ratio
Annual household income at the 95th and 20th percentiles (in 2014 dollars), and the ratio of the 95th to the 20th percentile (the 95/20 ratio). A household income percentile is a level of income below which a given percentage of households fall. For example, 95 percent of households earn below the 95th percentile and 20 percent of households earn below the 20th percentile. The 95/20 ratio is a useful measures income inequality, with a higher ratio indicating greater inequality. Data for 1980 through 2000 are based on surveys in those years but reflect income from the year prior, while data for 2015 represents a 2011-2015 average. For more information, see the data and methods document. | National Equity Atlas Data & Methods: Technical Documentation
95/20 ratio (95th percentile income divided by 20th percentile income):
Why it matters
There is a growing consensus that inequality has a negative impact on economic growth and prosperity. Recent economic research finds that inequality hinders economic growth, and that greater economic inclusion leads to more robust and sustained growth.
Policy strategies: Policies to reduce income inequality
- Raise the incomes of low-wage workers by increasing the minimum wage, enacting living wage laws, and adopting or expanding the Earned Income Tax Credit
- Implement progressive tax policies and strengthen the safety net
- Make it easier for workers to start and join unions
- Pursue full employment through monetary policy, infrastructure investments, work-sharing, and other strategies
- Expand access to high-quality public education, including universal preschool
Washington DC’s EITC Lifts the Incomes of Low-Wage Workers
Tax policy is an important tool for reducing inequality and the Earned Income Tax Credit (EITC) plays a major role in boosting incomes and encouraging work for low-income working families. 25 states, along with the District of Columbia, New York City, and Montgomery County offer their own EITCs. Washington, DC’s EITC is the most generous in the nation. It offers 40 percent of the federal credit (while some states offer as low as 10 percent), it is refundable (if the credit is larger than your tax obligation, you get it back in cash), and it was recently expanded to reach childless workers (workers without children as well as non-custodial parents), a large share of whom are not typically eligible. Learn more.