By Joshua L. Rosenbloom, PhD (Iowa State University)

It would be hard not to notice that we are living in a world of increasing inequality. According to data collected by the Federal Reserve, the share of the nation’s wealth owned by the top one percent of U.S. wealth holders increased almost 50 percent, from 22.8 percent in 1989 to 31.9 percent at the end of 2025. Meanwhile, the gap between high and low earners has also been expanding. One widely used measure is the ratio of wages of workers at the 90th percentile of the earnings distribution to those at the 10th percentile (the 90-10 gap). According to the Bureau of Labor Statistics, the 90-10 gap was 3.7 in 1979 and grew to 5.0 by 2014, roughly where it is today.

This widening gap helps us understand why robust economic growth has not translated into more positive views about the economy. GDP per capita, the conventional scorecard of economic performance, has more than doubled since the mid-1980s. But, because of the growing income gap, this prosperity has not been widely shared. For example, adjusted for inflation, the real compensation of production workers today is no higher than it was in 1979 (see MeasuringWorth.com). This marks a major shift. In the 100 years from 1879 to 1979, the compensation of production workers grew at roughly the same rate as GDP per capita.

These facts both help us to understand our experience of the modern economy and raise a whole host of questions. Why are the fruits of economic growth increasingly concentrated in the hands of the few? Have there been other times when there has been a similar level of inequality? What can we learn from past experiences? What will happen in the future?

Contemporary information about the distribution of wealth and income is the product of a federal statistical system. The ability to collect and analyze nationally representative data that provide consistent and reliable information about the modern economy rests the expertise of thousands of economists, statisticians, and other social scientists across a range of federal agencies. Their work gathering and analyzing data provides the objective truth needed to guide policy decisions.

Putting modern data in historical context rests on the shoulders of social scientists. Drawing on historical income tax records, for example, it has been possible to construct measures of inequality back to 1917. The results show that the share of income earned by the top 10 percent reached a peak just before the Great Depression, fell dramatically during the Depression and World War II and remained low until the 1980s, when it began to rise again.

“Putting modern data in
historical context rests on
the shoulders of social
scientists.”

What explains this pattern remains unresolved, but is an active subject of research. One explanation, offered by economists Claudia Goldin and Lawrence Katz, is a race between rising education levels in the workforce and the increasing demand for educated workers caused by skill-biased technological change. The narrowing of the wage gap, they argue, reflects the effects of the high school movement and then the growth of college enrollment, while today’s widening gap is the result of the failure of education levels to keep pace with demand created by modern technologies.

Other scholars argue, however, that the mid-century narrowing of the wage gap was caused by New Deal regulations and the unique conditions created by World War II. The system, they contend, persisted until the deregulatory movement that began under Ronald Reagan.

Whether the explanation has to do with labor market institutions, the pace of educational advancement or something else, the longer history of inequality that economic research has uncovered should make clear that the level of inequality observed today is not inevitable. Social scientists studying these phenomena can offer useful diagnoses and suggest policies to address inequality in income and wealthy distribution and their negative social consequences.

Dr. Joshua L. Rosenbloom is a Professor of Economics at Iowa State University, Ames, IA, and a Research Associate of the National Bureau of Economic Research, Cambridge, MA. His research focuses on the history of the U.S. economy and the economics of science, technology and innovation. He earned his Ph.D. in Economics from Stanford University in 1988. Prior to moving to Iowa State University in 2015 he spent 27 years on the faculty at the University of Kansas. He was previously Chair of the Iowa State Department of Economics (2015-25), Program Director at the National Science Foundation (2012-14), and Associate Vice Chancellor for Research & Graduate Studies at the University of Kansas (2006-12). He is a fellow of the American Association for the Advancement of Science, the Cliometric Society, and the Economic History Association.

Download as PDF