TRENDS IN THE DISTRIBUTION OF HOUSEHOLD INCOME BETWEEN 1979 AND 2007
Summary Figure 2.
Shares of Market Income, 1979 and 2007
Source:Congressional Budget Office.Note:For information on income definitions, the ranking of households, the allocation of taxes, and the construction of inequality indexes,see “Notes and Definitions” at the beginning of the study.
market income concentration; a shift to more-concentrated sources explains the other half. In the lateryears, an increase in the share of total income from morehighly concentrated sources, in this case capital gains,accounted for about four-fifths of the total increase inconcentration. Over the 1979–2007 period as a whole,an increasing concentration of each source of marketincome was the more significant factor, accountingforfour-fifths of the increase in market incomeconcentration.
Income at the Very Top of theDistribution
The rapid growth in average real household marketincome for the 1 percent of the population with thehighest income was a major factor contributing to thegrowing inequality in the distribution of householdincome between 1979 and 2007. Average real householdmarket income for the highest income group nearly tri-pled over that period, whereas market income increasedby about 19percent for a household at the midpoint of the income distribution. As a result of that unevengrowth, the share of total market income received by thetop 1 percent of the population more than doubledbetween 1979 and 2007, growing from about 10 percentto more than 20percent. Without that growth at the topof the distribution, income inequality still would haveincreased, but not by nearly as much. The precise reasonsfor the rapid growth in income at the top are not wellunderstood, though researchers have offered severalpotential rationales, including technical innovations thathave changed the labor market for superstars (such asactors, athletes, and musicians), changes in the gover-nance and structure of executive compensation, increasesin firms’ size and complexity, and the increasing scale of financial-sector activities.The composition of income for the 1 percent of thepopulation with the highest income changed significantly from 1979 to 2007, as the shares from labor and businessincome increased and the share of income represented by capital income decreased. That pattern is consistent witha longer-term trend: Over the entire 20th century, laborincome has become a larger share of income for high-income taxpayers, while capital income has declined as ashare of their income.
1979 2007 1979 2007 1979 2007 1979 2007 1979 2007010203040506070
LowestQuintileSecondQuintileMiddleQuintileFourthQuintileHighestQuintile81st–99thPercentilesTop 1 Percent