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Title: Examining the Great Leveling: New Evidence on Midcentury American Inequality
Citation Type: Working Paper
Publication Year: 2020
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Abstract: The mid-20th century American decline in income inequality has been called “the greatest leveling of all time,” despite a similarly unmatched rate of economic growth. To establish this insight, pioneering research has tracked a century of top income shares. However, limitations in the historical data had meant that we still do not fully understand the dynamics of change within the bottom 90% of the income distribution (prior to the 1960s). This paper sheds light on changes within the middle class—to study early and midcentury trends in income and wage inequality, by applying a powerful statistical model to archival tax records and survey data. We find that: (i) pre-war economic growth (and reduction in inequality) reached the upper middle class sooner than it (and they) reached the poorest households; and (ii) wartime relative income gains for the poorest were short-lived, while they proved durable for the upper middle class. In short, the relative gains from the New Deal, World War II and postwar eras were both more pronounced and more durable for the upper middle class than for the poorest. However, postwar wage compression lasted 30 years, to the particular benefit of the working poor.
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Authors: Fisher-Post, Matthew
Series Title: WID.world Working Paper
Publication Number: 2020/01
Institution: HAL
Pages: 1-73
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Data Collections: IPUMS USA
Topics: Poverty and Welfare
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