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Exploring Income Inequality, Part 1: Overview

To provide some historical context to the current public discussion of income inequality, we’re releasing a series of posts this week that examine trends in income inequality in recent decades and outline different data sources to examine the issue. The broad facts of income inequality over the past six decades are easy to summarize:

  • The years from the end of World War II into the 1970s saw substantial economic growth and broadly shared prosperity.
    • Incomes grew rapidly and at roughly the same rate up and down the income ladder, roughly doubling in inflation-adjusted terms between the late 1940s and early 1970s.
    • The income gap between those high up the income ladder and those on the middle and lower rungs — while substantial — did not change much during this period.
  • Beginning in the 1970s, economic growth slowed and the income gap widened.
    • Income growth for households in the middle and lower rungs of the ladder slowed sharply, while incomes at the top continued togrow strongly.
    • The concentration of income at the very top rose to levels last seen more than 80 years ago, during the “Roaring Twenties.”
  • Wealth is much more highly concentrated than income, although the wealth data do not show a dramatic increase in concentration at the very top the way the income data do.

This broad overview reflects data from a variety of sources.  Different data sources tell different parts of the story; no single source is best for all purposes.  CBPP issued a guide today that discusses the strengths and limitations of various data sources in understanding trends in income and inequality.  It also highlights the trends that those key data sources reveal and gives additional information on poverty measurement and the distribution of wealth.

Stay tuned.  The next post in this series will look at income growth in the post-World War II decades and the widening of income disparities starting in the 1970s.