Great Compression

As Great Compression ( from the English Great Compression) a period mid-20th century is called in economic history, in which reduced differences in income and wealth in many industrialized nations. In the U.S., this phase began in the early 1940s. The name goes back to an essay published in 1992, the economists Claudia Goldin and Robert Margo.

More details

Goldin and Margo write in their essay on the Great Compression:

" When the United States emerged from the phase of the war and the depression, they showed not only a far lower unemployment than before, they also had a revenue structure that was more egalitarian than any later. "

A later analysis of income tax contributions by the economists Thomas Piketty and Emmanuel Saez showed that this incipient phase in the 1940s until the 1970s, the income only slightly diverged in the USA. Since the 1980s, then sat on a massive scale, a growing income inequality, combined with a wealth concentrations. The same is true for Canada and England. The cause is considered the abolition or reduction of tax progression. Because in states that retained the tax progression, such as France and Japan, the Einkommenunsgleichheit and wealth concentration did not occur to the same extent. According to Paul Krugman, the Great Compression in the U.S. is due to the New Deal policies of Franklin Roosevelt, including from a steep increase in tax progression, the increasing bargaining power of unions as well as the significant reduction in wage dispersion by wage controls as part of the New National War Labor Board, 1942., the effects would be stopped until the early 1980s.