Gallup poll shows two-thirds of Americans are unhappy with nation's wealth distribution.



It's "the defining challenge of our time," says President Obama, who spotlighted the issue in his State of the Union address last month. A Gallup poll found that two-thirds of Americans are unhappy with the nation's distribution of wealth. Experts say it may be slowing the economy.



A. Yes. What's new is the widening gap between the wealthiest and everyone else. Three decades ago, Americans' income tended to grow at roughly similar rates, no matter how much you made. But since roughly 1980, income has grown most for the top earners. For the poorest 20% of families, it's dropped. Incomes for the highest-earning 1% of Americans soared 31% from 2009 through 2012, after adjusting for inflation, according to data compiled by Emmanuel Saez, an economist at University of California, Berkeley. For the rest of us, it inched up an average of 0.4%. In 17 of 22 developed countries, income disparity widened in the past two decades, according to the Organization for Economic Cooperation and Development.

Q. So who are the top 1% in income?

A. They're bankers, lawyers, hedge fund managers, founders of successful companies, entertainers, senior managers and others. One trend: Corporate executives, doctors, and farmers made up smaller shares of the top 1% in 2005 than in 1979. By contrast, the proportion of the wealthiest who work in the financial and real estate industries has doubled. The top 1% earned at least $394,000 in 2012. Through most of the post-World War II era, the top 1% earned about 10% of all income. By 2007, that figure had jumped to 23.5%, the most since 1928. As of 2012, it was 22.5%.

Q. How has the middle class fared?

A. Not well. Median household income peaked in 1999 at $56,080, adjusted for inflation. It fell to $51,017 by 2012. The percentage of American households with income within 50% of the median — one way of measuring the middle class — fell from 50% in 1970 to 42% in 2010.



MORE: 5 tycoons who want to close the wealth gap



A. The evidence is mixed. Countries that have more equal income distributions, such as Sweden and other Scandinavian countries, tend to enjoy more social mobility. But a study released last month found that the United States isn't any less mobile than it was in the 1970s. A child born in the poorest 20% of families in 1986 had a 9% chance of reaching the top 20% as an adult, the study found — roughly the same odds as in 1971.


Q. So why has income inequality worsened?



Q. Does wealth distribution follow a similar pattern?

A. It's even more pronounced. A Pew Research Center study found that the wealthiest 7% of households grew 28% richer from 2009 through 2011. For the bottom 93%, collective wealth fell 4%. That's largely because wealthy households own far more stocks and other financial assets than others. By contrast, whatever wealth middle-class Americans have is mainly in their home equity.


Q. Where do the 1% live?


Q. Is anything being done to narrow the wealth gap?

A. President Obama has made the issue a priority and wants the government to act to reduce the disparities. The president managed to restore higher tax rates on incomes above $398,350 last year. And he's pushed other steps that might narrow the gap slightly, such as a higher minimum wage. But congressional Republicans say those steps could hurt economic growth and have resisted most such measures.

Q. Is everyone concerned about the wealth gap?

A. Some conservative economists question much of the data. They note, for example, that Saez's figures don't include government benefits, such as Social Security or food stamps, or employer payments for health insurance, that benefit the less-than-rich. Yet the Congressional Budget Office did include government benefits and the effect of taxes in its own study and still found a sizable gap: For the top 1%, income jumped 275%, adjusted for inflation, from 1979 to 2007. For the middle 60% of Americans, it grew less than 40%.




In a speech last month, Florida Republican Sen. Marco Rubio acknowledged the enormous pay disparity between a fast food company's cashier and its CEO.


AP Business Writers Paul Wiseman in Washington and Bernard Condon in New York contributed to this report.

Follow Chris Rugaber on Twitter @chrisrugaber



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