How the Rich Have Fared, 1973-87

Historically, income inequality has increased during recessions and declined during recoveries. This cyclical pattern, however, does not characterize the period since 1973. After five years of the current recovery, inequality is greater than it was in 1982 at the trough of the last recession, and much grater than in 1973. We begin by analyzing changes in the income shares of each decile. We then define an absolute measure of "the rich," analogous to the official definition of poverty. We show that since the 1973 cyclical peak, the ranks of the rich have more than doubled, with rising mean income accounting for about half of the increase and increased inequality accounting for the other half. Furthermore, the increased mean is not primarily due to increased earnings of male family heads, but rather to increased earnings of wives.