“There is a real divide in the United States between the lifestyles and social conditions between the 20 to 30 percent of the population that has a college degree and the working-class majority that doesn’t. But in terms of federal economic policy, it’s largely irrelevant … In basic dollar terms, the top one percent — and the top 0.1 percent and the top 0.001 percent — have truly pulled away from the upper-middle class even while most college graduates’ fortunes remain broadly similar to those of the median American.” (Matthew Yglesias, Democrats should take the class warfare message to upscale suburbs, July 12, 2017) 

Thomas Piketty, Emmanuel Saez and Gabriel Zucman have published some worrying new data on the growth of income inequality in the United States. (See their “Distributional National Accounts: Methods and Estimates for the United States”, NBER Working Paper 22945, December 2016)

Their analysis indicates that before 1980 middle class Americans as well as the poor were experiencing faster income growth than the affluent Americans. This was the case in both pre-tax and after-tax terms.

However there has been a dramatic shift in income distribution since the early 1980s, as the affluent, and extremely affluent, have experienced rapid income growth while all of the others have lagged dramatically behind. 

Indeed, as the chart which follows indicates, the income growth groupings in percentile terms seems to resemble a hockey stick.

That is, income growth for 99% of the population was either flat or close to zero, and then income growth spikes up sharply for the highest one percent group.

Indeed, as the following two charts illustrate, the top one percent, the top 0.1 percent and the top 0.001 percent, have all sharply pulled away from middle class earners.

Moreover, their U.S. data also indicate that college graduates’ income growth opportunities are as meager as those of median income earners.

An obvious conclusion from the sharp worsening in income inequality in the U.S. is that there is a strong correlation between the two major problems currently plaguing the country - extreme political polarization and increasing income inequality.

Income Growth In The U.S, 1980-2014

(Click on image to enlarge)

Source: David Leonhardt, Our Broken Economy, in One Simple Chart, NYT, Aug. 7, 2017