Almost all of the inflation adjusted post-tax, post-transfer payment income growth in the United States in the time period from 1979-2011 has accrued to the top 1% of the income distribution. Their income has increased at a rate of 3.4% to 3.9% per annum (depending on the inflation index used) in that 32 year time period from $281,000 (in 2011 dollars) in 1979 to $918,000 (in 2011 dollars) in 2011. The top 1% has seen its income relative to the bottom 20% increase by 243% in that time period. Those in the next lower 3% of the income distribution have seen 40% income growth relative to the bottom 20% in that time period.
Everyone else has had seen declining income or had income growth indistinguishable from zero in that time period. Avoiding a decline in relative income for those in the 20th to 60th percentiles of income has been made possible only with substantial transfer payments to the middle class.
Why has this taken place? The decline of unions? Tax and welfare policies? A genuine change in the way that goods and services are produced that makes the 1% much, much more productive than anyone else?
Is it possible to change this without undue harm to overall productivity? This depends to a great extent on the answer to why this has happened. Is it "real" or "artificial" in any meaningful sense?
A 2006 study suggest that this is largely due to incredible income gains in geographically concentrated growth in the IT and financial industry (largely confined to ten of the roughly 3000 U.S. counties).
There is a coincidence between the fall of private sector unions and increased inequality to third-world levels both in Colorado and in the U.S. We are at historic record levels of income inequality and wealth inequality. A conceptual analysis of the limits of an incentive outlook is here.
U.S. corporate law governing how executive compensation is set may also be a factor. Inequality may actually be a drag on the economy. Lack of class mobility is also a concern in the U.S. relative to its peers.
Tax breaks for the affluent are an important factor in rising inequality. Higher ed tax credits have had very little impact in improving access to higher education.
The mix of occupations in the economy has changed.
This is not some revolutionary new discovery.
I posted an analysis reaching an almost identical conclusion 27 months ago and also 42 months ago (considering causes related to the tax code and bankruptcy code) A 2009 analysis revealed that contrary to the expectation of mainstream economists, this gap survived the Great Recession (and noting considerable geographic variation in the recovery rates).