Global trade and technology are significant trends, but they’re not laws and policies. The actual rules have also changed notably since the 1970s. Back then, there were all sorts of stabilizers that pushed working-class wages up and kept rich people’s wages lower. The minimum wage, at its pre-1970s peak, was almost 50 percent higher than it is now (inflation adjusted, naturally). Unions were stronger and had more government support. The United States taxed the rich much higher relative to the working class. (The top bracket was taxed at 70 percent in 1978; now it’s 35 percent.) It’s hard to imagine, but regulations largely limited the profitability of banks and kept bankers’ financial compensation low.
The new rules, combined with the other major changes, have effectively removed both the floor and the ceiling. It’s easier for some to make a lot more money and for others to fall much further behind. That has meant a huge increase in inequality. The top 1 percent of families now makes 26 times the average of the other 99 percent (the ratio was 11 to 1 in 1979). The top 0.1 percent makes 130 times the bottom 99 (up from a 38-to-1 ratio 40 years ago). And the inequality is not just between classes. The average wages of the average American have stayed largely flat for decades, but those averages hide a lot of volatility, as more people find themselves at the extremes of wealth or poverty. A successful plumber who has mastered all the new water-flow sensor technology and pipe-fitting innovations (and is probably in a union) can make more than $100,000 a year, while other plumbers, who just know the basics, could make less than $20,000.