The Growth Of Earnings Inequality Has Slowed

WHY IS THIS IMPORTANT? The economic welfare of Americans is determined not just by growth, but by the distribution of that growth. If Americans lose faith in the promise that a "rising tide lifts all boats," support for economic policies that raise the tide will ebb.

THE TREND: Since the mid-1970s, incomes have become more unequal, not only in the United States but in most developed nations. However, it appears that most of the increase in hourly wage inequality occurred in the 1980s, with little or no growth in the first half of the 1990s (through 1995). Even studies that show a higher increase in income inequality generally find that the rate of increase has slowed since 1989.²⁸ In fact, between 1996 and 1998, hourly wages of workers in the top 90th percentile grew slower than they did for workers in the 50th and 10th percentiles.²⁹

In contrast to individual earnings trends, inequality of family income has continued to grow. Between 1980 and 1996, real incomes went up 58 percent for the wealthiest 5 percent of American households, but less than 4 percent for the lowest 60 percent. But in the 1990s, demand-side labor market forces related to trade, foreign investment, or new technologies can no longer be considered the main causes of this growing inequality. The dominant factors appear to be the increasing share of one-parent families and increasing incomes for wives of men who are high earners.

THE DATA:

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