The Great Divergence (post-1980 inequality)
The empirical pattern, dated to about 1979–1980, in which U.S. productivity kept rising while median pay flattened and income and wealth shares shifted to the top.
Definition
“The Great Divergence” (Paul Krugman’s label, widely adopted) names the break between the postwar decades, when incomes at the bottom, middle and top grew at roughly the same rate, and the period since about 1980, when growth accrued disproportionately to top earners. The standard exhibits are the productivity-pay gap, the CEO-to-worker pay ratio, the top 1 or 10 percent income share returning to pre-WWII levels, and falling absolute mobility (the share of children out-earning their parents). Who uses the term and how: progressive and left commentators treat it as proof the system is rigged by policy (tax cuts, deregulation, union decline); libertarian and conservative commentators either dispute the measurement (compensation vs wages, household composition, transfers) or accept the pattern and attribute it to technology, globalization, and skill premiums while arguing poverty reduction matters more than inequality. In this corpus Johnny Harris presents the pattern as consensus data and dates it to Reagan-era policy; Benn Jordan and Hasan Piker build on it; the right-lane sources address poverty rather than the divergence directly. The concept is the empirical floor under Why is socialism popular with young Americans?: the 1980s-born cohort is the first with a coin-flip chance of out-earning its parents.
Key Properties
- Timing: the inflection is consistently placed at 1979–1980 across sources; the postwar “shared prosperity” period runs roughly 1947–1979.
- Measures that move together: productivity vs median pay; CEO ratio (about 26x mid-1970s to nearly 400x late 1990s per Harris); top-10% income share (about half in the early 1900s, compressed mid-century, back to that level by the 2010s); absolute mobility (near 100% for 1940s births, about 50% for 1980s births).
- Pre-tax vs post-tax: Harris’s claim that after-tax series show the same shape is the point conservatives most contest (transfers and tax progressivity).
- The divergence is an income and wealth-share story; it says nothing on its own about absolute living standards, which is where the right’s rebuttal (poverty, consumption) lives.
Examples from Sources
| Example | Source |
|---|---|
| Median household income in 2010 equal to 1997 in real terms, while per-capita GDP grew | How Money Actually Works |
| Absolute mobility 100% (1940s) → 80% (1950s) → 59% (1970s) → about 50% (1980s) | How Money Actually Works |
| The ~$60–90k “say fuck you” autonomy threshold as the divergence’s lived form | The Richest Country Is Pretty Mid Now |
| ”Capitalism is failing them”: housing, cost of living, post-college prospects | Hasan Piker: This Is Why So Many Young People Are Turning to Socialism (Impact Theory w/ Tom Bilyeu) |
In the Sources
| Source | Context |
|---|---|
| How Money Actually Works | Segment 2’s decade-by-decade walk; segment 3’s top-1% share (20% → 10% → rising) |
| The Richest Country Is Pretty Mid Now | Post-2008 extraction as the mechanism |
| Hasan Piker: This Is Why So Many Young People Are Turning to Socialism (Impact Theory w/ Tom Bilyeu) | The divergence as the reason young people turn socialist |
Related
Concepts: Capitalism, Greedflation, Surplus Value, leverage-economy Entities: Johnny Harris, Benn Jordan, Hasan Piker Debates: Why is socialism popular with young Americans?, Is the problem capitalism, or crony capitalism?