The period spanning from 1870 to 1910, encompassing the Gilded Age and Progressive era, is often characterized as a time of rapid economic growth in the United States. However, the common perception of this period as one where the top 10% prospered while the bottom 90% saw limited improvements may be misleading.
The existing data on income inequality during this time period is based on estimates from 1870 and 1910. The estimate for 1870, provided by Peter Lindert and Jeffrey Williamson, used a method known as a “social table” to estimate income distribution among different social and occupational groups. This estimate, while not disputed, likely understates inequality due to issues like underenumeration of the poor in census data.
On the other hand, the estimate for 1910, derived from the work of Thomas Piketty in his book “Capital in the 21st Century,” has been found to overestimate income inequality. Corrections made to Piketty’s estimates reveal a significant flaw in the data, leading to a higher proportion of total income going to the wealthiest groups.
When comparing the estimates from 1870 and 1910, a significant decline in income inequality between the top 10% and bottom 90% becomes apparent. Contrary to popular belief, the data suggests that the income share for the bottom 90% increased between 2.0 and 2.2% annually, indicating that the poorest Americans saw substantial improvements in their standard of living during this period.
This new perspective challenges the notion of rising capital concentration and inequality during the Gilded Age and Progressive era. Instead, it highlights a period of unprecedented economic growth where the bottom 90% experienced larger income gains than the average, leading to significant improvements in their living standards.
Contemporary writers of the 19th century noted exceptional gains at the bottom of the income ladder, a fact that has been overlooked in modern interpretations due to misleading data. By reevaluating the income distribution dynamics of the time, we can better understand the real progress made by those at the lower end of the income spectrum, shedding new light on a pivotal period in American economic history.
Vincent Geloso, Assistant Professor of Economics at George Mason University, provides valuable insights into the nuanced nature of income inequality during the late 19th and early 20th centuries. His research challenges conventional wisdom and offers a fresh perspective on the economic dynamics of the Gilded Age and Progressive era.
