The Geography of Inequality in America,
1969 to 2007
Strange though it may now seem, for the first forty years after World War II the topic of economic inequality in America was a backwater, attracting little interest and very little research. Among economists, a broad consensus held that inequality was stable or declining, that the American middle class was dominant in both economics and politics and would remain so, and also that it was destined to absorb rich and poor alike into a single common social net. The general American self-image was not of “capitalism” or “free enterprise” but of the mixed economy, strongly stabilized by the New Deal, by a progressive income and estate tax, a high minimum wage, and later on by the impact of Lyndon Johnson’s Great Society, especially Medicare and Medicaid but also parts of the War on Poverty. In 1969, when measured inequality reached its low point, there is no evidence that anyone anticipated the turnaround to come.
Wage and earnings (or pay) inequality—inequality measured across jobs— began to rise with the recessions of 1970 and 1973–1974 and then sharply in the back-to-back recessions of 1980 and 1981–1982, peaking initially around 1984. Pay inequality then stabilized, but household earnings inequality continued to rise, in part because the recessions and economic dislocation set off major changes in family life, increasing the number of low-income single parent households that would fall to the bottom of the income scales and also the number of double-income families without children that would move to the top.1 Thus the shocks to jobs and pay had both direct and secondary effects, recreating income and living-standard differentials and class differences that had been muted, especially among white Americans, since the Great Depression and the Second World War.