Official income inequality statistics indicate a sharp rise in inequality over the past four decades. These statistics, however, may not accurately reflect inequality in well-being for a number of reasons. Income is likely to be poorly measured, particularly in the tails of the distribution. Also, current income may differ from permanent income, failing to capture the enjoyment of past and future income through borrowing and saving and the consumption of durables such as houses and cars. This paper examines inequality in economic well-being in the U.S. since the 1960s using consumption and income based measures of inequality. We advance the literature on inequality by constructing improved measures of consumption over a long time period. We examine income inequality between 1963 and 2011 using data from the Current Population Survey and consumption inequality between 1960 and 2011 using data from the Consumer Expenditure Survey. We investigate inequality patterns in different parts of the distribution by reporting ratios of percentiles, focusing on the 90/10, 90/50, and 50/10 ratios. In general, accounting for taxes considerably reduces the rise in income inequality since 1963, while accounting for non-cash benefits has only a small effect on changes in income inequality. Consumption
inequality is less pronounced than income inequality, particularly for the bottom half of the distribution. Income inequality fell in the 1960s while consumption inequality rose. In the 1980s, inequality for both measures rose, but the increase was much greater for income than for consumption. After 2005 these measures moved in opposite directions as income inequality rose sharply while consumption inequality fell. Over the period from 1980 to 2011, both income and consumption inequality rose, but the rise was much more noticeable for income (45 percent) than for consumption (19 percent). Furthermore, until 2005 differences
between the two are only apparent in the bottom half of the distribution.