In America today the richest 1% own more wealth than the bottom 90%: that's the greatest wealth gap of any advanced economy in the world. In fact, the gap between the haves and have-nots among Americans has widened to proportions not seen since before the Great Depression. Click through to find out how wealth inequality in America has evolved over the past 100 years.
It was in the 1910s, as America's wealth was starting to overtake the United Kingdom's, that the country's money sitation was starting to be explored and measured. In 1915 University of Wisconsin statistician Willford I King published the first ever comprehensive analysis of US household wealth called The Wealth and Income of the People of the United States. This was more than a decade before the federal government started collecting data on the topic.
In this first analysis King was shocked to find found that the wealthiest 1% boasted 15% of the nation's income. However, a study from 2003 by economists Thomas Piketty and Emmanuel Saez puts this figure at nearer 20%. The inequality didn't go unnoticed, and the large wealth of rich families such as the Rockefellers and the Vanderbilts led to the introduction of progressive federal income tax in 1913 and estate tax in 1916, as well as the rise of unions. This saw the wealth gap narrow in the late 1910s.
It was a time when socialism was on the rise, and tensions between the wealthy and the less well-off were heightened by bombings on wealthy industrialists. During the late 1910s the bottom 90% owned around 20% of the nation's wealth according to a 2015 analysis by Piketty and Saez together with British economist Sir Tony Atkinson, and their share was on the up.
This trend continued into the 1920s, and by 1923 the wealth share of the poorest 90% had increased to 23%. But by 1928 that share had fallen to 15%. Needless to say, during those five years the richest 1% saw their wealth share surge to a record 52% in tandem with a pronounced hike in income share. But why did this happen?
A number of factors explain this growing gap between Americans at this time, but one of the most important is the anti-unionism that swept the country and reached fever pitch during the 1920s. At the end of the previous decade, strikes by workers looking for higher wages had disrupted the country, and many people were angry that necessities such as fuel for heating had been cut off because of such action. There was also a concern the strikes were linked to communism. Soon unions were increasingly regarded as anti-American and union membership fell, along with the wages of folks of more modest means.
And so by the end of the decade 60% of Americans were living below the poverty line, while the richest people in the country were riding high and benefitting from "prosperity's decade". The decade was one of great inequality: as unions faltered, industrial production rose by 30% between 1919 and 1929 and America was responsible for almost half of the world's industrial output, but wages for the workers driving the industry dropped from 84.5 cents an hour in 1923 to 62.5 cents by the end of the decade. For the richest there was no such hardship, and unprecedented stock market gains inflated their growing wealth, money that was easier to hold onto considering the reduction in the top rate of tax.
But the Great Depression of the 1930s changed everything. As well as losing vast sums of money following the stock market crash, the richest 1% were slapped with a hefty tax increase when President Hoover raised the top rate from 25% to 63% in 1930. Later in the decade, President Roosevelt whacked it up to 79%. This threw the wealth share of the top 1% into decline, which dragged on through the next decade.
The Roosevelt administration was strongly pro union and legislation enacted in 1933 as part of the president's New Deal enshrined collective bargaining rights. Public animosity to unions softened and membership increased significantly. This sway towards workers and their rights eventually saw the federal minimum wage introduced in 1938.
The Great Depression was devastating for many of the country's rich, and by the end of the decade the wealth share of the top 1% had dropped by more than 10% and their income share was on a stark downward trajectory. But more or less the reverse was true for the bottom 90%, with the financial crisis readdressing the wealth equality balance.
The trend continued into the 1940s, and together with the previous decade and the years up to the 1970s, this era has been dubbed the Great Compression. The wage structure had started narrowing in the 1930s, which continued into the 1940s and led to the birth of middle-class America.
The creation of a middle-class section of society was the result of manufacturing workers' wages rising by 67% between 1929 and 1947, while the real income of the most affluent 1% fell by 17%. By the end of the 1940s the wealth share of the top 1% was 29%, down from 52% in 1928.
Again, the narrowing of the wealth gap can also be attributed to the growth in union membership with a huge wave of strikes occurring in 1945 and 1946 that saw two million workers leave their posts in different union actions. This was coupled with higher taxation of the rich during the expensive Second World War. Indeed, the upper tax rate reached an all-time high of 94% in 1944.
Following the Second World War and a decade on from the Great Depression, the recovered US economy saw a boom during the 1950s. In fact, the decade allowed America to claim its position as the world's richest country. How? After the war industry had the chance to thrive. There was a sharp rise in car production between 1946 and 1955, while a housing boom helped by affordable mortgage rates allowed the country's economy to grow. Working and middle-class Americans saw their wages increase, and they spent their massively increased disposable income on everything from housing to cars to household appliances, boosting industry further.
This rise in wages was partly down to the peak of 35% in union membership in the mid 1950s, meaning that many workers were in a strong position to negotiate with their bosses and demand better pay. In fact, in 1952 there were a record 470 large-scale strikes involving almost 2.8 million employees across the US. And the jobs market was starting to change: a focus not just on goods production but services too generated more white-collar jobs for Americans, and by 1956 the majority of Americans had these kinds of roles such as office workers, managers and teachers. Pushed on by the union action that had swept the country, some of these firms offered guaranteed annual wages and workers benefits.
And what about the top 1% during this time? While the top tax rate remained high during this decade at 91%, real average wealth of the richest Americans at the time actually rose steadily in the decade. However the top 1%'s share of the country's income and wealth still continued to fall, albeit less markedly than it did during the 1940s.
During the 1960s wealth inequality in America carried on falling but there were signs that the postwar economic boom was beginning to run out of steam. The wealth and income share of the bottom 90% did continue to grow throughout the decade, but consumption inequality began to rise.
Real wage growth stalled and the real average wealth of the bottom 90% began to stagnate during the latter half of the decade. However, it wasn't much better for the richest in the country, and the wealth of the top 1% actually started to fall, in addition to their overall wealth and income share.
Even though the wages of the poorest Americans weren't growing, these factors helped narrow the overall gap between rich and poor in the US. Moreover, the upper tax rate remained high at between 70% and 91%.
The postwar boom eventually fizzled out in the early 1970s. Both the rate of inflation and unemployment were depressingly high, and wealth and income inequality were beginning to rise. Plagued by this 'stagflation' (high inflation and unemployment), the nation's economy was in very bad shape by this point.
The Great Compression was officially over. Real wages for the bottom 90% were hit hard and their income share began its long decline, which continues to this day. Unionism was demonized and membership dropped, weakening collective bargaining.
The gap between America's haves and have-nots grew sharply in this decade of greed and excess. During the 1980s the wealth and income share of the bottom 90% plummeted while the wealth and income share of the top 1% soared. It is a decade that economist Paul Krugman called the "Great Divergence", that America is still experiencing the ramifications of today.
The income and wealth share of the least affluent Americans continued its downward trajectory in the 1990s, the decade when globalization took hold. US manufacturing was decimated as competition from overseas intensified and real wages in the sector fell.
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The super-rich on the other hand continued to get richer. While the upper tax rate was raised during the decade to 39.6%, the top 1% of Americans still saw their wealth increase. Their share of the nation's wealth rose from 24.2% in 1990 to 28.6% in 1999.
America's economic polarization worsened during the 2000s. Real wages for regular Americans stagnated and in many cases fell despite increases in productivity as union membership dropped from 13.3% of US workers in 2000 to 12.3% in 2009. In fact, between 1980 and 2005 US income increased, but more than 80% of that increase went to the top 1%.
The top 1%, however, saw their pay packets bulge, rising 47% on average during the first half of the decade. Even though the wages of the richest Americans fell somewhat following the financial crisis of 2008, in percentage terms they still remained higher than they were at the beginning of the decade.
Over the 2010s the gap between rich and poor became ever more cavernous. Data collated by the Federal Reserve shows that in the second quarter of 2019 the top 1% possessed 32.4% of the nation's wealth, up from 28.6% in 1999. And the wealth of the top 1% reached a jaw-dropping $34.73 trillion.
During the same period the wealth share of the bottom 90% dropped by 17%. The hundreds of millions of people who make up the bottom 90% have wealth of $32.8 trillion. It's even more striking when you consider that the bottom 50% only hold $2.02 trillion of the country's wealth. Just 10.5% of American workers belonged to a union in 2018, down from 20.1% in 1993, making it increasingly difficult to bargain for raises, although a number of protest movements have emerged highlighting the mushrooming disparity, including Occupy Wall Street.
And under the Trump administration the wealth gap continued to grow. President Trump's tax cuts have enabled the ultra-rich to pay a lower rate of tax than the working class for the first time in history. Real wage growth picked up during the decade but wealth inequality hasn't improved. America's most privileged continue to amass huge sums of money while many people in the country struggle to make ends meet. Only time will tell what impact President Biden will have on America's wealth gap in the 2020s.
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