Class Structure and Income Inequality in the United States.

Abstract

Income inequality in America has increased substantially since the early 1980s. Although sociological theory suggests an important impact for social classes on recent changes in income distribution, prior research has largely ignored the link between class structure and growing aggregate income inequality. This study delineates a theory of class based on antagonistic social relations within the workplace and investigates the relationship between class structure and trends in aggregate income inequality from 1983 to 2010. The proposed theory defines four distinct class positions based on unequal ownership and authority relations within production: workers, who are excluded from the means of production and do not control the activities of others; proprietors, who own the means of production and control the activities of workers; managers, who do not own the means of production but have delegated control over the activities of workers; and independent producers, who own and operate small firms by themselves. These positions are called class positions because unequal ownership and authority relations are thought to engender intergroup conflict between those with and without property and authority in production. Growth in aggregate income inequality is affected by (1) changes in between-class income differences, (2) compositional changes in the relative size of different classes, and (3) changes in residual, or within-class, income dispersion. With data from the General Social Survey and the Current Population Survey, this study investigates each of these trends in turn and provides a formal decomposition that evaluates their relative impact on growth in aggregate income inequality. Results indicate that between-class income differences increased by at least 50 percent since the 1980s. This increase was driven by growing incomes for managers and especially proprietors together with stagnating incomes for workers. Results also indicate that, since the mid-1980s, the proportion of workers and independent producers increased, while the proportion of proprietors and managers declined. Finally, a formal decomposition analysis suggests that changes in the relative size of different classes had a small dampening effect and that growth in between-class income differences had a large inflationary effect on trends in aggregate income inequality, particularly during the 1990s.