For decades, we’ve been arguing about inequality in America—how big it is, whether it’s growing, and what, if anything, we should do about it. But every so often, new data arrives that forces us to rethink not just the answers, but the questions themselves. And the latest reconstruction of pretax national income distribution—painstakingly assembled from historical microdata—does exactly that.

It reveals a story that is at once familiar and startling: familiar, because we’ve long known that inequality has risen since 1980; startling, because the scale and structure of the shift are far larger, far more systematic, and far more persistent than even many economists realized.

Before diving in, let me state the central finding plainly:

Since around 1980, the distribution of pretax national income in the United States has undergone a dramatic and sustained upward shift. The Bottom 50% and Middle 40% have lost ground, while the Top 1% has gained—and the pace of this shift has accelerated over time.

This isn’t a matter of ideology. It’s arithmetic.

The Classes We Forgot to Name

Economists often talk about “the rich” and “the poor,” but those categories are too crude for what the data actually shows. When we divide the adult population into four groups—each representing a distinct rung of the economic ladder—the picture becomes much clearer.

Bottom 50%: Half the country. Their average pretax income in 2019 was about $18,500.
Middle 40%: The broad middle class, from the 50th to the 90th percentile. Their average income was about $75,000.
Forgotten 9%: The 90th to 99th percentiles—the upper‑middle class, the mass affluent.
Top 1%: The economic elite, with average pretax incomes exceeding half a million dollars in 2019.

Together, these four groups account for 100% of the population and 100% of pretax national income.

The Great Turning Point

From the early 1960s through the late 1970s, income shares were remarkably stable. The Bottom 50% held a steady slice of national income. The Middle 40% grew modestly as the economy expanded. Even the Top 1%—despite their reputation—didn’t pull dramatically ahead.

Then came 1980.

Something changed. Not overnight, but unmistakably.

Follow the Money, 1962–2019

The chart shows three lines diverging sharply after 1980:

Bottom 50% — a steady erosion of income share
Middle 40% — a slow but persistent decline
Top 1% — a dramatic rise, accelerating over time

The stability before 1980 makes the post‑1980 shift even more striking.
This is not a cyclical pattern — it is a structural one.

Annual Redistribution Flows (2019 Dollars)

Percentages can hide the sheer scale of what’s happening. When we convert share changes into dollar flows, the magnitude becomes impossible to ignore.

Cumulative Redistribution Flows between Classes

The pattern is unmistakable:

In the 1980s — the annual upward flow was measured in tens of billions
By the 2000s and 2010s — it was measured in hundreds of billions
The engine didn’t slow down — it accelerated

Since 1980, the cumulative numbers are even harder to ignore.
Over four decades, the Top 1% has taken in more than $30 trillion in pretax income that they simply did not have under the distributional patterns of 1980.
During that same period, the Middle 40% — the broad American middle class — has lost roughly $24 trillion in income share.

These aren’t abstract shifts.
They represent a wholesale redirection of the economy’s growth — away from the working and middle class, and upward to the very top.

Redistribution Flows by Group

To understand the dynamics, it helps to isolate each group’s experience.

This chart shows that, even adjusted for inflation, the amount of income going to the Top 1% continues to grow while the losses continue to grow for the Middle Class. Great for Wall Street, terrible for Main Street.

Yearly Redistribution Flows between Classes

Top 1% — gains almost every year, with bars growing taller over time
Forgotten 9% — sometimes gains, sometimes loses, but never dramatically
Middle 40% — consistent losses in dollar terms, larger than the Bottom 50 because their baseline income is higher
Bottom 50% — persistent losses, especially early in the period

The Middle 40% story is particularly striking.
They are not the poorest Americans, but they are the backbone of the income distribution.
When their share falls, the dollar losses are enormous.

Conclusion

The data tells a clear, non‑political story:

For decades before 1980 — income shares were stable
After 1980 — the distribution of pretax national income shifted upward
The Bottom 50 and Middle 40 — lost share
The Top 1 — gained share
The scale of the shift — measured in trillions of dollars over four decades — is staggering

This analysis does not assign blame or prescribe solutions.
It simply documents how the structure of the income distribution has changed over time.

The numbers are clear.
The patterns are persistent.
And the story they tell is one we can no longer afford to ignore.

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The Great Divergence We Forgot to Notice

Kier O’Neil

2026-01-18