Temporal evolution of the "thermal" and "superthermal" income classes in the USA during 1983-2001

TL;DR

This paper analyzes the income distribution in the USA from 1983 to 2001, revealing a stable two-class structure with a thermal lower class and a superthermal upper class, whose dynamics are linked to stock market fluctuations.

Contribution

It provides a detailed temporal analysis of income classes, showing the stability of the lower class and the market-driven fluctuations of the upper class over nearly two decades.

Findings

Lower class follows a stable exponential distribution with increasing temperature.

Upper class tail expands and contracts with stock market changes.

The society's income distribution aligns with the principle of maximal entropy.

Abstract

Personal income distribution in the USA has a well-defined two-class structure. The majority of population (97-99%) belongs to the lower class characterized by the exponential Boltzmann-Gibbs ("thermal") distribution, whereas the upper class (1-3% of population) has a Pareto power-law ("superthermal") distribution. By analyzing income data for 1983-2001, we show that the "thermal" part is stationary in time, save for a gradual increase of the effective temperature, whereas the "superthermal" tail swells and shrinks following the stock market. We discuss the concept of equilibrium inequality in a society, based on the principle of maximal entropy, and quantitatively show that it applies to the majority of population.