Analyzing Wealth Inequality Distribution
From 1980 to 2020, the distribution of income among U.S. household segments underwent significant changes, as illustrated by the Reuters bubble chart. The chart, which reflects the number of people in each income group and their average pretax income adjusted to 2023 dollars, offers a visual representation of the sharp concentration of income growth at the top 1 percent and top 10 percent, while the middle 40 percent and bottom 50 percent experienced only modest gains, if any.
The top 1 percent witnessed a dramatic rise in income, showing a steep upward shift in earnings that far outpaced all other groups. This rapid income growth caused the top 1 percent to pull sharply away from the rest of the population, including within their own ranks, where the very richest pulled ahead from the rest of the top 1 percent. The top 10 percent also saw substantial income gains, but their increases were less extreme than those of the top 1 percent.
In contrast, the middle 40 percent experienced modest income growth that lagged far behind the gains seen at the top. While the number of people in this segment grew, their average income did not rise substantially in inflation-adjusted terms. The bottom 50 percent, who make up the majority of the population, saw the least income growth among all groups. Though the population in this segment increased, the chart shows only slight improvement in income, underscoring the persistence of income stagnation for lower-income households.
It is important to note that income inequality began climbing rapidly after 1980, driven not only by the top quintile pulling away from others but also by dramatic inequality rising even within the top 20 percent and within the top 1 percent itself. The increase in inequality is primarily due to rising incomes among the very highest earners rather than a shifting share of capital versus labor income. Disparities within both labor and capital income groups have intensified.
The Reuters bubble chart provides a clear comparison of income changes over time, with the y-axis adjusted to 2023 dollars for a more accurate analysis. However, it does not show the absolute income figures for each income group at any given year or the income changes for the top 10 percentile between 2010 and 2020. Nonetheless, the chart offers compelling evidence of the uneven distribution of income growth across income groups over the past four decades, reinforcing the narrative of increasing income inequality in the U.S.
AI and technology played a significant role in this income inequality trend. The top 1 percent, for instance, leveraged advances in finance, business, data-and-cloud-computing, and technology to accelerate their income growth. Conversely, the middle 40 percent and bottom 50 percent, who may have lacked access to such tools and resources, witnessed only modest gains.
