This lopsided income growth means that income inequality has risen in recent decades. Figure A presents the share of all income (including capital gains income) held by the top 1 percent of taxpayers between 1917 and 2012 for the United States and by region. As Figure A makes clear, income inequality reached a peak in 1928 before declining rapidly in the 1930s and 1940s and then more gradually until the late 1970s. The 1940s to the late 1970s, while by no means a golden age (as evidenced, for example, by the perpetuation of gender, ethnic, and racial discrimination in the job market), was a period in which workers from the lowest-paid wage earner to the highest-paid CEO experienced similar growth in incomes. This was a period in which “a rising tide” really did lift all boats. This underscores that there is nothing inevitable about top incomes growing faster than other incomes, as has occurred since the late 1970s. The unequal income growth since the late 1970s has brought the top 1 percent income share in the United States to near its 1928 peak.

H/T Barry Ritholtz

The Increasing Income Inequality In America

Infographic source: EPI