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Income Inequality Has Risen Since the 1980s, Driven by Increased Inequality in Labor Market Earnings

• Much of this increase has been driven by increased concentrations in the top 1 percent of the income distribution.

Inequality and inequality of opportunity are correlated across countries.

• However, measures for inequality of opportunity do not show the same consistently upward trend that was experienced by income inequality.
• Antipoverty policies implemented in the United States over the last five decades may have helped stave off poverty and inequality of opportunity despite labor market trends.

Not All Policies That Affect Inequality Will Have the Same Impact on Inequality of Opportunity

• There are no direct measurements that allow us to gauge the current impact of policies on inequality of opportunity.

Rising income inequality has the potential to affect outcomes for children whose parents are at the lower end of the income scale by curtailing their opportunities. This report aims to understand the extent to which inequalities in opportunity and outcomes are related — and the mechanisms that drive that relationship — to help evaluate which policies have the most potential to level the playing field.

This report reviews recent trends in inequality in outcomes (particularly, income inequality) and proxies for inequality of opportunity (measures of intergenerational transmission of income) and presents evidence on the extent to which they are correlated across countries and within countries across time. We discuss the evidence that shows that inequality in income and wealth has been increasing in the United States and most developed countries since the 1980s and that income inequality and inequality of opportunity are correlated across countries, but proxy measures for inequality of opportunity do not show the same consistently upward trend that was experienced by income inequality.

The report then presents a framework to understand the mechanisms underlying the relationship between inequalities in income and opportunity. In light of this framework, we discuss the potential effects of policies on both income and inequality opportunity, and how these can be quantitatively assessed.

• Chapter One

  Introduction

• Chapter Two

  Framework for Understanding Inequality in Income and Opportunity

• Chapter Three

  Trends in Inequality

• Chapter Four

  The Relationship Between Income Inequality and Intergenerational Transmission of Income

• Chapter Five

  Potential Impact of Policies on Inequality and Inequality of Opportunity

• Chapter Six

  Conclusion and Road Map for Further Work

• Appendix A

  Factors for the Increase in Wage Inequality

• Appendix B

  Reference Sources for the Great Gatsby Curves

• Appendix C

  Results of Income Support Simulation

• Appendix D

  Within-Country Changes in Inequality of Income and Opportunity: Analysis for Additional Countries