The Great Divergence is a term given to a period, starting in the late 1970s, during which income differences increased in the US and, to a lesser extent, in other countries. The term originated with the

Nobel laureate The Nobel Prizes ( sv, Nobelpriset, no, Nobelprisen) are awarded annually by the Royal Swedish Academy of Sciences, the Swedish Academy, the Karolinska Institutet, and the Norwegian Nobel Committee to individuals and organizations who make out ...

Princeton Princeton University is a private research university in Princeton, New Jersey. Founded in 1746 in Elizabeth as the College of New Jersey, Princeton is the fourth-oldest institution of higher education in the United States and one of the nine ...

economist and ''

New York Times ''The New York Times'' (''the Times'', ''NYT'', or the Gray Lady) is a daily newspaper based in New York City with a worldwide readership reported in 2020 to comprise a declining 840,000 paid print subscribers, and a growing 6 million paid d ...

'' columnist

Paul Krugman Paul Robin Krugman ( ; born February 28, 1953) is an American economist, who is Distinguished Professor of Economics at the Graduate Center of the City University of New York, and a columnist for ''The New York Times''. In 2008, Krugman was th ...

, and is a reference to the "

Great Compression The Great Compression refers to "a decade of extraordinary wage compression" in the United States in the early 1940s. During that time, economic inequality as shown by wealth distribution and income distribution between the rich and poor became much ...

", an earlier era in the 1930s and the 1940s when incomes became more equal in the US and elsewhere.

A 2017 report by the

Congressional Budget Office The Congressional Budget Office (CBO) is a federal agency within the legislative branch of the United States government that provides budget and economic information to Congress. Inspired by California's Legislative Analyst's Office that manages ...

on the distribution of income in the US from 1979 to 2007 found that after federal taxes and income transfers, the top earning 1% of households gained about 275% and that the bottom 20% grew by only 41%.Congressional Budget Office: Trends in the Distribution of Household Income Between 1979 and 2007
October 2011. Figure 3. As of 2006, the US had one of the highest levels of income inequality, as measured through the Gini index, among similar developed or

First World The concept of First World originated during the Cold War and comprised countries that were under the influence of the United States and the rest of NATO and opposed the Soviet Union and/or communism during the Cold War. Since the collapse of ...

countries.Weeks, J. (2007). Inequality Trends in Some Developed OECD countries. In J. K. S. & J. Baudot (Ed.), ''Flat World, Big Gaps'' (159–74). New York: ZED Books (published in association with the UN). Scholars and others differ as the causes and significance of the divergence,Krugman, Paul.
The Rich, the Right, and the Facts: Deconstructing the Income Distribution Debate
prospect.org, 19 December 2001Sowell, Thomas.
Perennial Economic Fallacies
" ''Jewish World Review'' 7 February 2000, URL accessed 3 November 2011. which helped ignite the

Occupy movement The Occupy movement was an international populist socio-political movement that expressed opposition to social and economic inequality and to the perceived lack of "real democracy" around the world. It aimed primarily to advance social and econo ...

in 2011. While education and increased demand for skilled labour is often cited as a cause of increased inequality, especially among conservatives, many social scientists point to conservative politics,

neoliberal Neoliberalism (also neo-liberalism) is a term used to signify the late 20th century political reappearance of 19th-century ideas associated with free-market capitalism after it fell into decline following the Second World War. A prominent fa ...

economic and social policies and public policy as an important cause of inequality; others believe its causes are not well understood.Congressional Budget Office: Trends in the Distribution of Household Income Between 1979 and 2007
October 2011. Inequality has been described both as irrelevant in the face of economic opportunity (or

social mobility Social mobility is the movement of individuals, families, households or other categories of people within or between social strata in a society. It is a change in social status relative to one's current social location within a given society ...

) in America and as a cause of the decline in that opportunity.Here is the source for the "Great Gatsby Curve" in the Alan Krueger speech at the Center for American Progress on 12 January
/ref>White House: Here's Why You Have To Care About Inequality
Timothy Noah , tnr.com, 13 January 2012 Others consider that the exodus of manufacturing jobs from industrialized countries since the 1990s has been another defining factor. For instance, the journalist

James Surowiecki James Michael Surowiecki ( ; born April 30, 1967) is an American journalist. He was a staff writer at ''The New Yorker'', where he wrote a regular column on business and finance called "The Financial Page". Background Surowiecki was born in Mer ...

pointed out in a 2013 article for ''

The New Yorker ''The New Yorker'' is an American weekly magazine featuring journalism, commentary, criticism, essays, fiction, satire, cartoons, and poetry. Founded as a weekly in 1925, the magazine is published 47 times annually, with five of these issues ...

'' how in 50 years "big business" had changed from high-paying manufacturers to low-paying retailers

In 1960, the country's biggest employer,
General Motors The General Motors Company (GM) is an American Multinational corporation, multinational Automotive industry, automotive manufacturing company headquartered in Detroit, Michigan, United States. It is the largest automaker in the United States and ...
, was also its most profitable company and one of its best-paying. It had high profit margins and real pricing power, even as it was paying its workers union wages. And it was not alone: firms like Ford, Standard Oil, and Bethlehem Steel employed huge numbers of well-paid workers while earning big profits. Today, the country's biggest employers are retailers and fast-food chains, almost all of which have built their businesses on low pay—they've striven to keep wages down and unions out—and low prices.

While these retailers and fast-food chains are profitable, their profit ''margins'' are not large, which limits their ability to follow the lead of successful companies in high-growth industries that pay relatively generous salaries, such as

Apple Inc. Apple Inc. is an American multinational technology company headquartered in Cupertino, California, United States. Apple is the largest technology company by revenue (totaling in 2021) and, as of June 2022, is the world's biggest company b ...

The combined profits of all the major retailers, restaurant chains, and supermarkets in the Fortune 500 are smaller than the profits of Apple alone. Yet Apple employs just 76,000 people, while the retailers, supermarkets, and restaurant chains employ 5.6 million.

The

International Labour Organization The International Labour Organization (ILO) is a United Nations agency whose mandate is to advance social and economic justice by setting international labour standards. Founded in October 1919 under the League of Nations, it is the first and o ...

's 2013 "World of Work Report", predicted that the potential for social unrest in the

European Union The European Union (EU) is a supranational political and economic union of member states that are located primarily in Europe. The union has a total area of and an estimated total population of about 447million. The EU has often been des ...

is the highest in the world.

References

{{reflist Economic inequality Income in the United States

See also

References