People and Their Money - Income: The Richest Get Richer

In the period 1967 to 2000, the richest fifth of households in the United States increased its share of aggregate income. All other groups lost ground. The richest got richer, the rest relatively poorer.

To give these households some dimension, the following table shows the average income of each fifth for 1967 and 2000 in constant 2000 dollars:

Average Income of Five U.S. Household Segments (Constant 2000 $)

	Ave. income 1967	Ave. income 2000	Change, 67 to 00 -%
Lowest fifth	7,147	10,190	42.6
Second fifth	19,485	25,334	30.0
Third fifth	31,111	42,361	36.2
Fourth fifth	43,528	65,729	51.0
Highest fifth	78,881	141,620	79.5
Top 5%	125,732	250,146	99.0

All groups saw their incomes rise, but only the top fifth gained share. In 1967, there were 60.8 million households, in 2000 106.4 million. The top 5% (not shown in the graph but included in the top fifth) increased their share of aggregate income from 17.5% to 21.9% — a rate almost twice as high as that shown for the highest fifth of households, the only fifth that showed a growth in share. All other segments lost ground. Thus even within the richest group, the super-rich grew faster than the rich.

This shift in wealth toward the top clearly shows that political efforts to create a more "equal" society were not on the front burner in this era. Many different factors may explain this. Among these might be the following:

• The industrial structure of the U.S. shifted from one centered on heavy industry to one organized around a more diffuse structure of services and, lately, to one based on information. This has eroded the power of unions and, possibly, the popular feeling that everyone was part of a single working-class society. The emphasis on white-collar occupations and higher educational attainment no doubt contributed to a weakening of the collective sense of participation in a middle-class enterprise.
• This period saw the rise of organized minorities, led by the Civil Rights movement, and the proliferation of other groups — women, the disabled, Hispanics (due to relaxation of immigration laws in 1965). As groups separately sought to realize gains and to establish rights by minority-based political efforts, more general initiatives, common during the Depression and World War II, were weakened.
• Many specific programs aimed at fighting poverty through various interventions and tools — housing subsidies, minimum wage, food stamps, legal aid, etc. — had not been unambiguously successful. "Trickle down" theories took hold and were embraced by those who favored less direct government involvement and lower taxes — at a time when the economy was, on the whole, producing jobs.
• International tensions relaxed as the Cold War drew to its end and the Berlin Wall finally fell. These events eroded the sense of a national community laboring against external threats. Entrepreneurial energies were freed up at a time when the Baby Boom was also creating an Economic Boom. Since the 1980s, an almost uninterrupted expansion, one might say an exuberant "free-for-all," has characterized economic times.
• The single largest birth cohorts in American history — the Baby Boomers — matured and began amassing skill and wealth. They greatly stimulated the economy by their sheer size and their demand for goods and services. Also, people in their maturity make the most money, and the elderly have the most assets. Improved health care improved life expectancy in this period and brought about a population more grey than any ever before in history.

In the next panel, we examine this pattern over time and look at income growth. The data show that the shift toward a topside concentration of wealth occurred in the last 20 years of this period.

Source: U.S. Bureau of the Census. Current Population Survey. March issues. "Share of Aggregate Income Received by Each Fifth and Top 5 Percent of Households (All Races): 1967 to 2000." 21 March 2000.