DOCUMENT RESUME ED, 123 312 UD 096 027 AUTHOR . Lindert, Peter H.; Williamson, Jeffrey G. TITLE . Three Centuries of Americap Inequality., INSTITUTION-- Wisconsin Univ., Madison. Inst.-for Research on ) 0- Poverty. , SPONS AGENCY Department df Health, Education© and Welfare), Washin9ton, D.C. REPORT NO ' IRP-DP-333-76 PUB DATE Mar 76 NOTE 8gp. EDRS PRICE M1 -$0.83 HC-$4.67 Plus Postage -DESCRIPTORS American His':ory; Economic Change; *Economic Climate; *Economic Delopment; *Economic Disadvantagement; Economic Facto ; Economic Opportunities; Economic Progress; Econom Research; Economic Status; Equal Opportunities (Jobs Growth Patterns:. Historical Reviews; Income; Socioeconomic Status:CeTrend Analysiq; *United States History IDENTIFIERS *United States ABSTRACT . Income inequality in theAnited States displays considerabl e variance"since the seventeenth century. There Is no eter-Pal constancy' to the degree t inequality 'in total income, in labor earnings, or in income from conventional nonhuman wealth eitIler before or after-the effects of government taxes and spending. When all-the necessary adjustments t3 the raw data are made, it appears /,incomeand wealth were more evenly distribute& just before the Korean War than in 1929. Income. inequality has shown little trendsince Korea. The entire history of inequality 'also points to the fact that inequality.moveMents are' not the result of mere movements among demogrphic groups-, but follow trends in the basic occdpationaI pay gaps as well gas in the leveland dispersion in profit rates and rents. This essay:surveys the detailed evidence that reveals these r_ broad' patterns. It s/pecificalay seeks to clarify Americaninequality/ history. The following outline of topics is followed: growth now-equalgty later; measuring inequality; postwar stability; the 'levelling era of 1929-1951; the Uneven plateau of 1860-1929 (inequalit evidenCe); the uneven- ilateau of 1860-1929 (pay ratios and factor hares)1 wealth inequality trends before the Civil War; the antebellum- surge in wage inequality; and the agenda for thestudy of inequalit and economic growth, based on this survey of American distribution experience. (Author /AM) Documepts acquired by ERIC include many informal unpublished * materials not available from other sources. ERIC makes everyeffort * * to obtain the best copy available. Nevertheless, items ofwarginal * reproducibility are often encountered and this affects thequality * of the 14crofiche and hardcopy reproductions ERIC makesavailable * * via the EPIC Document Reproduction Service (EDRS) .EDRS is not * * responsible for the quality of the original document. Reproductions* * supplied by EbRZ are the best that can be made fromthe original. * 41***********************************************************#********* a P- 333 -7 U.S. OEPARTMENT OF HEALTH, EOUCATION & WELFARE NATIONAL INSTITUTE OF EOUCATION THIS DOCUMENT HAS BEEN REPRO. DUCED EXACTLY AS RECEIVED FROM THE PERSON OR ORGANIZATION ORIGIN ATING IT POINTS OF VIEW OR OPINIONS STATED DO NOT NECESSARILY REPRE- SENT OFFICIAL NATIONAL INSTITUTE OF EDUCATION POSITION OR POLICY Three Centuries of American Inequality, Peter H. Lindert e es, Jeffrey G. 1.Tilliamson March 19)76 i The research reported he'rju-as supported in part by funds &anted to i the Institute for Research on Poverty at -the University of 6vlsconsin-.1 Madison by the!)epartment of Health, Education., °and Welfare p'4rsuant 1 to the provisions of the Economic ppportunity. Act of 1964. Th'e opinions expressed are tho'se of the authors. i , I Outline I. Growth Now-Equality Later ?. II. Measuring Inequality III. Postwar Stability IV. The Levq1ling Era, 1929 -1951 Ns. V. The Uneven Plateau, 1860-1929:Inequality Evidence VI. The Uneven Plateau, 1860-1929: Pay Ra'tiOs and Factor Shares. VII. Wealth Inequality Trends Before the Civil War VIII. The Antebellum Surge in Wage Inequality The:Agenda fl. Appendix Tables THREE CENTURIES OF AMERICAN INEQUALITY I. -Growth Now-Equality Later? Is increasing.inequality an, inevitablebyproduct of modern economic' r growth? Indeedrs>can the investment requirements of.early "capitalist development only be satisfied by the surplusgenerated by rising.inequal- ity? Can only the advanced twentieth centuryeconomies afford the luxury: of egalitarian trends?; Questions4;4 such as these have been at the heartof social and . economic historical theory since Britaln beganthe Industrial Revolu tion two centuries ago, The answers are slow in coming and thehistorical 'N e debateover the English worker's standardof living is as hot today as. it was in the first.half. of the'nineteenthcentury.when EAgland's . Candition.was-being debated so vigorously. The issue is Hardly academic since similar debates'have warmed to theboiling pOint ihsalmost all ,contemporary Third World nations. Yet, in spite of this long.trb.dition which confronts the "growth rlw-equalitylacer" issue, quantitative documentation of historical inequality experience rem s/iinadequate. A little progress has been made sinceKUznets's [1955] 'Ilea to the economics profession some twenty yearsago, but a full scale attack on the documentation of historicalnequality Mends is only now beanning. Make no mistake ab.out it:. long-terd historicaldocumentation is essen- formuiation and testing of theories of capitalist growth, . tial to the and distribution. Knowing how inequality changed with economicdevelop- tent in the past is'an,fessential step towards judginghow closely inequality is linked either to rapid growth or to early stagesof development, 4 United States experience is especially interestingand relevan cif for no other reason becauseof de Tocqueville's famous hope tha the New World could somehow avoid the classic conflict between m Bern growth and income equality, a conflict so painfully obVious in nglanitig . , and the European continent even as early as the 18305 when deTocqueville made his fampuS visit to, America: What does. Ameri 's reco now reveal a kentury and a half later? By,,sifting through tax lists", probate records, payr 11 data, and manuscript censuses, a generation of social and economic h4torians can.now supply' us with considerable,insight into-thepre-1929-experi- , ence. The outstandipg fact is that income inequality has displayed considerable variance since the seventeenth century. 'There is no eternal constancy to the degree of inequality in total income, in, labor,earnings, or in income from conventional nonhuman wealth, either -before or after theeffects of government taxes and spending.Non uman . wealth steadily became more unequally distributed from the late ,seventeenth century to the late nineteenth. Income and earnings distributions are much more difficult to document bUt what data we I f have suggest no clear trend in earnings inequality fromthe late seventeenth century to the st4rt of the nineteenth and the onset of modern industrialization., This general stability ended not too many years prior to de Tocqueville's visit. Throughout the Antebellum'? period, stexting aYound 1820, wide earnings gaps opened up, skill premia were on the rise,,and wealth concentration accelerated. In short, Skilled labor, professional groups, and rban wealth holders prospered much faster than '.farm hands and:the urban unskilled. A 4 ,vr 3 I rt 0 , °dramatic change in*northeastern Amesida'4-incomedistributiOn wft 44 01 4 ilargely complete by 1860 or1880. After the Civil-Tar, earnings Nigh levels 2. and total income 'inequalityfluctuated atound'historically With one last secular inequality'surge,atleast in urban. America, appearing fromtitt. 1890s to WorldWar I.9 A brief 'and dramatic levelling .of incomes during World War I.waserased by the 1920s so 'that wide inequalitywas restored by 1929. The 1920s repiesent a watershedin American inequalityexperi-,' .,, ..,. Simon ence. With the appearance of newand far more detailed data, . ., . _..... Kuznets and others supplied estimatespurporting to show that income inequality dropped dramatically betweenthe late 1920s and the late 1 picked up this 1940s. ,Defenders and critics of capitaligm alike new ammunition, and the perennial debatebroke out once again,Arthur Burns viewed this levelling assolid eviance.thatpriyate enterise . counted led to a just and equal distributiOnof economic rewards, and. social revolUtions of the transformation "as one of. the.great .., . "2 Butns1 was defending only maturecapitalism ay an history. -. 3 income leveller, and even he might concurwith the Kuineta,conjecture ' that incomes areequalized.onl; late in the process of capitalist development.f011owing long episodes of increasinginequality. This invited'the.inference that if the. poor indeveloping Countriet wou:LJ_ , only be patient ("growthnow"), capitalism wouldeventually become a levelling force("equality later"). The Critics would not evenaccept this weak and tardy defense of income has really become capitalism. In fact some still deny that morequally distributed, 'Theycharge that Burn's "socialrevolution" 6 4 is based on statistical legerdemain. Since the 1920s the rich have become more adept at concealing their incomes. Social statisticians 9: have, in turn, distorted' the data even further'to'produce afalse equalization of income. IL the truth were knoWn, say the critics, income inequality -rises at the onset of capitalistdevelopment and , fails toreverse thereafter. Furthermore, say the critics, aggregate inequality statistics hide more fundamental distribution indicators. In particular, the critics assert that class paydifferentials have