The most important fact to recognize about income distribution in the U.S. is that it has not always been governed by a single directional trend or tendency. The reason for this is that the most powerful force determining income distribution is class struggle.
In my last few posts, I have been examining the concept of a “middle class” and its relationship to income. There is no avoiding the reality that differences in income have real, meaningful effects on people’s lives. Those with higher incomes are able to enjoy forms of freedom, activity, and choice denied to those with lower incomes. But income brackets are not the only way of conceptualizing “class” and may not be the most important way of thinking about “class” in modern societies.
The most powerful driver of changes in income distribution is the relationship between employers (those who own farms, factories, and businesses) and employees (those who don’t own significant economic resources and have to work for wages to make a living).
- How much power do employers and employees have as they bargain over the distribution of profits and wages? Is it legal for workers to organize and bargain collectively? Is it legal for employers to hire replacement workers during a strike?
- If workers become more productive, do they receive higher wages or do they just get to keep their jobs?
- Who has more political influence over health and safety regulations, minimum wage laws, or taxes?
- Does high quality public education help to drive social mobility? Or does the gap between public and private schools compound the advantages of wealth?
What does class struggle look like? This chart shows the percentage shares of income received by U.S. households near the middle (the second and third quintiles) compared with those at the top (the highest quintile) from 1935 to 2009:
First, notice that the rising tide of the post-WWII economic boom didn’t lift all boats equally. From the Great Depression until the early 1960s, the share of income received by the wealthiest households declined, while the incomes of lower and middle households rose. What happened? Workers gained economic and political power: they joined unions, they engaged in strike actions, they pushed elected officials to create jobs programs, unemployment insurance, minimum wages, and maximum working hours.
Next, notice what happened from the 1970s onward: the business class fought back. Business owners and their political allies fought hard to break unions and to reduce taxes on the wealthy that paid for government services (such as job training, unemployment insurance, and public higher education) benefiting the working class. In terms of income distribution, the gains made by workers from the 1930s to the 1960s have now been erased.
Income brackets (such as those we might use to identify a “middle class”) don’t necessarily tell us much about the forms of workplace power and political power that ultimately shift income distribution. To understand that question, we need to examine the balance of power between classes formed by employers and employees – those who own significant productive resources and those who do not.