Although the income distribution pattern in the United States is very different from that of a third world country -- where a small number of families may be very wealthy while a majority of families are very poor -- the change in income distribution is, nonetheless, disturbing. The poor in our society are not benefiting from the increased wealth in the country. The income gap between low-income families and high-income families is widened. At the same time, the share of households in the mid-income range has fallen to less than half. In 18 states high-income families got richer while the poor got poorer. In 31 states the incomes of high-income families grew faster than the incomes of low-income families (Bernstein, McNichol, Mishel and Zahradnik). The change of nature of the domestic economy, from manufacturing to service jobs is a main reason for the growth of income disparities in the United States. .
Technological change is the main cause of domestic economy change. The new information technologies tilt the earnings distribution by rewarding skilled, highly educated labor while reducing the demand (and therefore, the wages) for the products of the uneducated and unskilled workers. As machines replace workers, consumers are buying relatively fewer goods and more services. California is one of the nine states where the average income of the richest fifth of families was more than eleven times as great as the average income of the bottom fifth of families (Bernstein, McNichol, Mishel and Zahradnik), and California is also ranked as the second best performing state in the new economy among 50 states (Atkinson, Court and Ward). In New York, the financial sector has had increased profits and income without much increased employment. Stock trading has been taken over by computers, so additional employment is not needed. Partners share record profits, while people in lower and middle ranges are laid off.
