Big data allows researchers to analyze income inequality gap

In the first quarter of 2024, 10% of workers in the United States owned 67% of its total wealth. In contrast, the lowest 50% of workers owned 2.5% of the wealth. Income inequality contributes significantly to the rapidly growing wealth inequality in the U.S. and, by some measures, is the largest since before the Great Depression.

Now, University of Florida researchers, led by Assistant Professor of Sociology and Criminal Law Edo Navot, Ph.D., will conduct a first of its kind study to search for the root causes behind income inequality, supported by a grant from the National Science Foundation.

Historically, research on income inequality has focused on individual characteristics such as race, gender, education, and job duties. However, there has been a recent shift toward analyzing the employer, which controls employees’ income, and what role organizational structure plays in the income gap.

“What is really driving income inequality, is that most highly paid people are increasingly found in workplaces that are exclusively occupied by highly paid people,” Navot said.

Compared to today, a manufacturing company in the 1950s was more likely to be running multiple facilities, more likely to be unionized, and more vertically integrated. Within one building, you would find individuals holding positions with varying income levels from janitorial, administrative, production and executive, all employed by the same legal entity.

Today, organizations are far more likely to have a headquarters that almost exclusively houses executives and very high-level managers located in a separate building, while a much more separated work force that may be employed in a smaller facility, such as distribution or a retail shop with lower-level employees and a single supervisor or manager.

Research has found that the separation of people at different pay grades drives income inequality. The UF study will dig into why and how inequality between workplaces took off in the U.S.

The study will examine data gathered by the U.S. Census Bureau and cross reference it with administrative data drawn from unemployment insurance databases from all 50 states. This data connects information on wage earners to their employer and allows researchers to more closely analyze corporate structure’s role in growing income inequality.

But these variances may only be part of the story. The grant gives researchers access to reams of data to help them uncover hidden causes of inequality.

Democratizing data

Studies involving this amount of data would have been completely impossible without the Florida Research Data Center, or FLRDC, Navot said.

The Florida RDC is one of 33 Federal Statistical Research Data Centers that represent partnerships between federal statistical agencies and leading research institutes. The data centers provide secure environments so researchers can use restricted data while protecting respondent confidentiality. The FLRDC is located on the east side of UF’s Gainesville campus, within the Clinical and Translational Science Institute, and is the only RDC south of Atlanta.

 “Only at the FLRDC can a researcher access restricted microdata from 20 federal departments and agencies — including detailed manufacturing, construction and trade data, household-level American Community Survey data, health survey respondent-level data, and individual-level anonymized tax, income, and employment data,” said FLRDC executive director Jaclyn Hall, Ph.D.

The current FLRDC network comprises Florida State University, the Moffitt Cancer Center, the University of Central Florida, the University of South Florida, and the University of Florida. 

“The FLRDC democratizes access to data. It provides incredible opportunities not just to get access to confidential and protected data that would otherwise be unavailable but to allow researchers to create data sets that did not previously exist and to build novel connections between data sets that could not have been connected before,” Navot said.

This access allows Navot’s team to be the first set of researchers to systematically test multiple potential mechanisms, including changes in corporate structure, so they can say with confidence what factors are really driving income inequality growth.

The $395,000 NSF grant has been awarded for a three-year period.

The FLRDC has been supported at the University of Florida by the Office of Research, the Clinical and Translational Science Institute, the Bureau of Economic and Business Research, the Health Outcomes and Biomedical Informatics Department, the Institute of Food and Agricultural Sciences and the Colleges of Liberal Arts and Sciences, Business and Public Health and Health Professionals.