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Wikipedia on Income distribution:  Link

 

 

Breaking down how much of the increase in income inequality between 1979 and 2007 came from distribution of pre-tax income and how much from taxes and "government transfers", the CBO data shows that the 33% increase in inequality[101] came from a 23% increase in inequality from changes in distribution of "market income" to households (more of salaries, interest, dividends, capital gains, business income, etc. went to top earners); a 6% increase from changes in "government transfers" (social security, unemployment, the end of AFDC welfare, etc.); and a 4% increase from changes in federal taxation (overall decline in the average federal tax rate and shift in federal revenues from income taxes to less progressive payroll taxes, etc.).

 

Of the 23% increase in inequality from changes in pre-tax "market" income, most of that (79%) came from a "change in concentration within each income source." A smaller amount of inequality increase (21%) came from a shift to more concentrated income sources. This shift was toward income from money -- i.e. interest, dividends, business income and especially capital gains -- which are more concentrated toward top earners than income from salaries/wages).

 

 

According to the CBO and others, "the precise reasons for the [recent] rapid growth in income at the top are not well understood", but "in all likelihood," an "interaction of multiple factors" was involved.   "Researchers have offered several potential rationales."  Some of these rationales conflict, some overlap.

They include:

1.    Globalization hypothesis -- that low skilled American workers were losing ground in the face of competition from low-wage workers in Asia and other "emerging" economies;

2.   Skill-biased technological change, -- that the rapid pace of progress in information technology, increased the demand for the highly skilled and educated so that income distribution favored brains rather than brawn; and

3.   Superstar hypothesis (named by the Chicago economist Sherwin Rosen) -- that argued that modern technologies of communication often turn competition into a tournament in which the winner is richly rewarded, while the runners-up get far less than in the past (an example being the passing of the hundreds of comedians that made a modest living at live shows in the borscht belt and other places in bygone days that have been replaced by a handful of superstar TV comedians.)[108]

4.    Immigration of less-educated workers, which may have reduced wages for high school dropouts by 5% according to George Borjas policy and politics, or changes in the governance and structure of executive compensation, and

5.    The failure of government policy makers to do anything about it.

 

Analyzing the top three hypotheses, economist Paul Krugman found them to be "increasingly inadequate" as more evidence accumulated.

 

Globalization can explain part of the relative decline in blue-collar wages, but it can't explain the 2,500 percent rise in C.E.O. incomes. Technology may explain why the salary premium associated with a college education has risen, but it's hard to match up with the huge increase in inequality among the college-educated, with little progress for many but gigantic gains at the top. The superstar theory works for Jay Leno, but not for the thousands of people who have become awesomely rich without going on TV.[108]

 

Immigration was also criticized as weak or insufficient to explain the change.

 

Other scholars (such as political scientists Jacob S. Hacker, Paul Pierson, Larry Bartels and Nathan Kelly, and economist Timothy Smeeding) examining the issue also questioned the explanation of educational achievements and workplace skills.  Other countries of similar education levels and economies have not gone the way of the US, and the growth in inequality hasn't followed a pattern of "the 29% of Americans with college degrees pulling away" from those who have less education.

 

Moreover:

 

According to software developer Martin Ford, the replacement by automation not only of routine, lower-skill employment but jobs at high skill levels should have an effect on income inequality of shifting it not to more educated workers but to owners of capital.

 

 

The highest are blue States primarily, where the banking industry and industry in general is best developed.  

Range is from 0.419 to 0.5 in NY, with Puerto Rico at 0.537

Data is 2010 from the Census Bur.    Avg for USA is 0.469 or Texas which is ranked 43 out of the 52 areas, including DC and PR.