Income inequality in the United States remained relatively stable for a periodof nearly forty years.
Beginning in the 1970s, however, this period ofstability ended, as the first signs of widening income inequality becameapparent. Over the course of the 1970s and 1980s, an increasingly cleartrend toward greater income inequality emerged. By the end of the 1980s, thetop 20 percent of workers were receiving the largest share of income everrecorded by government figures, and the bottom three fifths were receiving thelowest shares ever recorded. This trend has continued into the 1990s andcurrently shows no signs of decline. When the indicators of growing inequalitywere first observed in the 1970s, some researchers argued that the effectswere merely temporary artifacts of short-term labor market disturbances. By theend of the 1980s, however, a long-term trend towards increasing inequalityhad clearly emerged, pointing instead to inflexible changes in the occupationalstructure itself. The new occupational structure appeared to be one with anincrease of well-paid technical, scientific, and professional jobs at the top, a”sliding” middle class, and a growing poorly-paid service and retail jobs atthe bottom. Several important labor-force changes appeared to be contributing tothe shifting occupational structure.
As occupational reconstructing and growingincome inequality became increasingly evident, a heated debated as to the causesand magnitude of these changes arose. Two dominant bodies of thought emergedaround the issue: the “job-skill mismatch” thesis and the “polarization”thesis. Mismatch theorists argue that there is an increasing distance betweenthe high skill requirements of post-industrial jobs and the inadequate trainingand mediocre qualifications of workers. They see the post-industrial economyleaving behind unskilled workers, especially women and minorities. For themismatch theorist, the trend toward greater inequality is temporary and willdissipate once the supply of workers acquires the skills demanded by apost-industrial economy. And they predict that the overall distribution ofworkers will experience and upgrading in their wages over the long run.
Polarization theorists, on the other hand, believe that the rise in inequalityis permanent, a result of the shift to a service-based economy. This vision ofthe post-industrial economy is characteristically polarized. The problemaccording to these theorists, is the type of jobs being generated in the neweconomy, not worker attributes.
Because they believe the causes are structuraland permanent, polarization theorists would deny the efficacy of public policiesdesigned to educate and train unskilled workers. They predict a long-termcontinuation of the trend towards increasing income inequality. Studies showthat the long run increase in income inequality is also related to changes inthe Nations labor market and its household composition. The wage distributionhas become considerable more unequal with more highly skilled, trained, andeducated workers at the top experiencing real wage gains and those at the bottomreal wage losses. One factor is the shift in employment from thosegoods-producing industries that have disproportionately provided high-wageopportunities for low-skilled workers, towards services that disproportionatelyemploy college graduates, and towards low-wage sectors such as retail trade. Butwithin industry shifts in labor demand away from less-educated workers areperhaps a more important explanation of eroding wages than the shift out ofmanufacturing.
Also cited as putting downward pressure on the wages ofless-educated workers are intensifying global competition and immigration, thedecline of the proportion of workers belonging to unions, the decline in thereal value of the minimum wage, the increasing need for computer skills, and theincreasing use of temporary workers. At the same time, long-run changes inliving arrangements have taken place that tends to provoke differences inhousehold incomes. For example, divorces and separations, births out of wedlock,and the increasing age at first marriage have led to a shift away frommarried-couple households and toward single-parent and non-family households,which typically have lower incomes. Also, the increasing tendency over theperiod for men with higher-than-average earnings to marry women withhigher-than-average earnings has contributed to widening gap between high-incomeand low-income households.