Growing American Inequality: Sources and Remedies

Over the past two decades the United States has experienced a startling increase in inequality. The incomes of poor Americans shrank and those of the middle class stagnated while the incomes of the richest families continued to grow. The well-being of families up and down the income scale has increased over the past five years, but the average income of the poorest Americans remains well below where it was at the end of the 1970s.

From the end of World War II until the 1970s, the percent age difference in average cash income bet ween well-to-do and middle-class American families generally declined. In the 1980s the gap began to widen noticeably. Better measurement of rich families’ incomes accounts for some of the apparent jump in the early 1990s, but the gap between middle- and high-income families almost certainly increased after 1992. The cash income difference between middle-income and poor families followed a similar trend. After narrowing for several decades after World War II, largely because of increased wages and improved Social Security and welfare benefits for the poor, the gap began widening in the early 1970s. The figure suggests that the trend in inequality has not been driven solely by worsening poverty among the poor or by spectacular income gains among the wealthy. It has been produced by growing disparities between Americans at every level of the income ladder.