Top Earners and the Great Compression: New Estimates Based on Tax Records

The Roaring Twenties increased inequality, especially due to the greater increase in the wages of the top 1% and the stagnancy of the bottom. [...] For example, in the late 1930s, these companies contributed almost 90,000 of all the officers in the top 1% and 2 points of the 2.6 percentage points to the aggregate of officers’ compensation in the top. [...] Moreover, if one decomposes the contribution according to the size of the corporation, the smallest ones declined steadily throughout this period, while the increase in the largest (both in terms of the number of officers and compensation) was not enough to compensate for this decrease. [...] Figure 10 represents the share of proprietors in the top 1% of the labor income distribution in both benchmark years, thereby confirming the significant change in the relative weight of the two groups. [...] The share of the bottom 95% stagnated during the 1920s and declined markedly during the first years of the Depression due to the impact of unemployment and wage cuts.