Do you ever feel like you’re working harder than your parents did, yet falling further behind financially? You’re not imagining things. Between 1979 and 2007, the top 1 percent of Americans saw their share of national income more than double, from about 10 percent to nearly 24 percent.
Meanwhile, the middle 60 percent of households watched their share drop from 47.8 percent to 38.5 percent.
This isn’t just another political talking point. It’s the most significant economic shift of our lifetime, and Timothy Noah’s The Great Divergence: America’s Growing Inequality Crisis and What We Can Do About It explains exactly how we got here, and what we can actually do about it.
Overview
Timothy Noah’s The Great Divergence (Bloomsbury Press, 2012) is the most accessible, comprehensive, and fair-minded summary of what economists have learned about America’s growing income inequality.
Born from a ten-part series Noah wrote for Slate in September 2010, a series that won the 2011 Hillman Prize, the first online-only work ever to do so, the book distills decades of academic research into clear, engaging prose.
The central argument is straightforward: since 1979, America has experienced a “Great Divergence” where the rich have pulled away from everyone else.
This isn’t because of a single cause, but rather a combination of factors that Noah systematically examines, education, technology, immigration, globalization, government policy, and the decline of labor unions.
And crucially, he doesn’t just diagnose the problem. He offers concrete policy solutions.
Reader Recommendation: Who Will Actually Love The Great Divergence
You should read The Great Divergence if:
- You’ve ever wondered why your salary hasn’t kept up with the cost of living, even though the economy keeps growing.
- You want to understand the “1 percent vs. 99 percent” debate beyond the protest signs and cable news soundbites.
- You’re looking for a non-partisan, evidence-based explanation of income inequality, not ideological cheerleading.
- You appreciate clear writing that makes complex economics accessible without dumbing it down.
You might want to avoid The Great Divergence if:
- You’re already deeply familiar with the academic literature on inequality (Noah synthesizes existing research rather than presenting original data).
- You’re looking for a deeply personal, narrative-driven account of poverty (the book focuses on the middle class and the rich, not the poor).
As The New York Times put it: “The Great Divergence by Timothy Noah is a book about income inequality, and if you’re thinking, ‘Do we really need another book about income inequality?’ the answer is yes. We need this one”.
Table of Contents
1. Introduction
Title: The Great Divergence: America’s Growing Inequality Crisis and What We Can Do About It
Author: Timothy Noah
Publication Details: Bloomsbury Press, first U.S. edition, 2012. 264 pages.
Author’s Credentials: Timothy Noah is an American journalist who has written for The New Republic (where he writes the “TRB” column), Slate, the Wall Street Journal, U.S. News & World Report, and the Washington Monthly.
He graduated from Harvard in 1980. His Slate series on inequality won the 2011 Hillman Prize for public service magazine journalism.
Context of The Great Divergence
The Great Divergence grew out of a ten-part series Noah published in Slate in September 2010. The series appeared about a year before Occupy Wall Street protesters camped out in Zuccotti Park and made “the 1 percent” a household term.
As Noah himself notes, the phrase “the Great Divergence” was borrowed from Nobel Prize-winning economist Paul Krugman, who used it in his 2007 book The Conscience of a Liberal.
The book is part descriptive, laying out the economic trends that have reshaped America since 1979, and part prescriptive, offering solutions to help ease the crisis.
Purpose of The Great Divergence
The book’s central thesis is that income inequality in the United States has grown dramatically since 1979, that this trend threatens American democracy, and that we can, and urgently should, take steps to reverse it.
Noah writes that “the difference in America between being rich and being middle class became much more pronounced” beginning around 1979. He aims to explain not only how this happened, but why it matters and what we can do about it.
2. Background
To understand the Great Divergence, you first need to understand what came before it.
From the early 1930s through the 1970s, America experienced what economists Claudia Goldin and Robert Margo called “the Great Compression”, a period when incomes became more equal. During the 1950s and 1960s, the income gap between rich and middle class actually shrank.
As Noah points out, the top 10 percent’s share of national income remained steady at about 34 percent from the 1950s through the 1970s.
This wasn’t an accident. It was the result of specific policies: high marginal tax rates (the top bracket exceeded 90 percent in the 1950s), strong labor unions, a rising minimum wage, and government investment in education.
As Noah notes, in 1942 President Franklin Roosevelt actually proposed a 100 percent marginal tax rate on incomes above the equivalent of about $345,000 today. Congress didn’t let him, but “the idea won popular support”.
Then everything changed. Starting in 1979, the trend reversed. The rich began pulling away from everyone else, and they haven’t stopped.
3. The Great Divergence Summary
What I Learned from This Book
Noah organizes his investigation around a series of questions: What caused the Great Divergence? Why has it been so much worse in the United States than in other advanced democracies? And what can we do about it?
The Numbers That Shocked Me
Let me share some of the statistics that genuinely stopped me cold:
- The top 1 percent received about 21 percent of the nation’s income in 2008, up from about 10 percent before the Great Divergence began.
- The top 0.01 percent, about 8,400 households making $9.1 million or more, increased their share of national income nearly fourfold since 1979.
- The middle 60 percent of American households saw their share of national income drop from 47.8 percent in 1979 to 38.5 percent in 2007.
- From 1980 to 2005, 80 percent of the nation’s total income gains went to the top 1 percent.
- In 1973, the average CEO made 27 times what the average worker made. By 2005, that had risen to 262 times.
These aren’t abstract numbers. They represent real people, real families, and real struggles.
The Causes: It’s Not One Thing
Noah is refreshingly skeptical of single-cause explanations. He systematically examines, and often dismisses, popular theories about what caused inequality.
Race and Gender
Many people assume the growing income gap is about racism or sexism. But Noah shows that the black-white income gap hasn’t grown since 1979, and the male-female wage gap has actually shrunk by nearly half. The Great Divergence can’t be blamed on either race or gender.
Immigration
Immigration does put downward pressure on wages for the least-skilled workers, about a 7.4 percent reduction for high school dropouts. But for the middle class, immigration’s impact has been minimal.
As Harvard economist George Borjas told Noah, immigration is “a contributor” to inequality, but “is it the most important contributor? No”.
Technology and Education
Computers and automation have eliminated many middle-skill jobs, bank tellers, typists, factory workers, while creating high-skill and low-skill jobs. This “job polarization” (or kudoka, as the Japanese call it) has hollowed out the middle class.
But technology alone doesn’t explain the Great Divergence. The key factor, Noah argues, is education. During the first half of the twentieth century, America led the world in educational attainment. High schools became universal, and college attendance surged.
This created a huge supply of skilled workers, which kept the “college premium” (the wage advantage of college graduates) from skyrocketing.
Starting in the 1970s, however, educational attainment stalled. As Goldin and Katz put it in their book The Race Between Education and Technology, America’s production of educated workers stopped keeping pace with technological change. The result? The college premium nearly doubled.
As Noah notes, “the average person born in 1975 received only half a year more of schooling than his parents”.
Globalization and Trade
Trade with low-wage countries has had some effect on inequality, Noah cites estimates that it accounts for about 12 to 13 percent of the Great Divergence. But this effect was relatively small until the 2000s. As Paul Krugman observed, it wasn’t until 2006 that the United States began doing more trade with developing countries than with other developed countries.
The more recent concern is offshoring of service-sector jobs. Economist Alan Blinder estimates that more than one-quarter of all U.S. jobs may eventually be threatened by offshoring. But it’s still too early to know how this will affect income distribution.
Government Policy
This is where things get really interesting, and where Noah’s analysis parts company with the conventional economic wisdom of the 1990s.
For years, economists argued that government policy played only a minor role in the Great Divergence. But Noah presents compelling evidence that politics has been central.
Political scientist Larry Bartels analyzed income growth under Democratic and Republican presidents from 1948 to 2005. The findings are striking:
- Under Democratic presidents, the biggest income gains went to the poorest Americans, tapering off as you moved up the income scale.
- Under Republican presidents, the pattern was precisely reversed: the biggest gains went to the richest Americans.
Bartels calculated that if the patterns of income growth under Democratic administrations had been in effect throughout the period, “income inequality would actually have declined slightly”.
The Decline of Labor Unions
This is one of the most important, and most underappreciated, factors in the Great Divergence.
In 1979, union membership in the United States peaked at about 21 percent of the workforce. Today, it’s about 12 percent, and in the private sector it’s dropped to about 7 percent.
The decline of unions explains about one-third of the growth in wage inequality among men, according to sociologists Bruce Western and Jake Rosenfeld.
As Noah puts it, “Draw one line on a graph charting the decline in union membership, then superimpose a second line charting the decline in middle-class income share, and you will find that the two lines are nearly identical”.
Noah traces this decline to the 1947 Taft-Hartley Act, which imposed severe restrictions on labor’s ability to organize. Taft-Hartley made it easier for employers to fire union supporters, eliminated the “closed shop,” and allowed employers to campaign against unions in ways that the earlier Wagner Act had prohibited.
The Rise of the “Stinking Rich”
Noah devotes an entire chapter, titled, memorably, “Rise of the Stinking Rich”, to the explosion of income at the very top.
Who are these people? According to a 2010 study by Jon Bakija, Adam Cole, and Bradley Heim, among the top 0.1 percent (making $1.7 million or more):
- 43 percent were executives, managers, and supervisors at nonfinancial firms.
- 18 percent were financiers.
- 7 percent were lawyers, 6 percent were doctors, and 4 percent were in real estate.
Noah shows how Wall Street transformed itself from a relatively boring industry (channeling savings into productive investments) into a high-risk, high-reward casino. Deregulation, the shift from private partnerships to public corporations, and the rise of high-frequency trading all contributed.
And it wasn’t just bankers. CEO pay exploded from 27 times the average worker’s pay in 1973 to 262 times by 2005. This wasn’t because CEOs suddenly became more productive.
It was because corporate governance broke down, compensation committees became captured by the CEOs they were supposed to oversee, and stock options (which were treated as cost-free by corporate accountants) became the primary form of compensation.
Why It Matters
Noah addresses the skeptics who say inequality doesn’t matter.
Some argue that inequality is good because it creates incentives. Noah responds: “Something close to the dystopia they envision where effort and skill don’t matter already exists for those toiling in the economy’s lower tiers”.
Others argue that income doesn’t matter, what matters is consumption.
But Noah points out that this argument ignores the fact that much consumption is debt-financed, and that the rising cost of housing, health care, and education has wiped out any gains from cheaper consumer goods.
Still others argue that Americans are still upwardly mobile. Noah demolishes this myth with data showing that the United States now has less upward mobility than most other advanced democracies. As he puts it, for American men, “parental income is more heritable than height or weight”.
The chapter titled “Why It Matters” is worth the price of the book alone. Noah argues that extreme inequality threatens democracy, corrodes social trust, and makes it harder for Americans to see each other as fellow citizens.
What to Do
Noah concludes with a chapter of policy recommendations:
- Soak the rich, raise marginal tax rates on high incomes, tax capital gains at the same rate as ordinary income, and eliminate the payroll tax cap.
- Fatten government payrolls, create a jobs program modeled on the New Deal’s Works Progress Administration.
- Import more skilled labor, remove immigration barriers for highly skilled professionals, which would reduce the college wage premium.
- Universalize preschool, invest in early childhood education to improve educational outcomes and reduce inequality later in life.
- Impose price controls on colleges and universities, college tuition has risen far faster than inflation, and government should use its leverage (student loans, research grants) to force colleges to control costs.
- Reregulate Wall Street, break up the too-big-to-fail banks and restore the separation between commercial and investment banking.
- Elect Democratic presidents, based on the historical data, Democratic administrations have produced more equal income growth.
- Revive the labor movement, repeal Taft-Hartley and make it easier for workers to organize.
4. The Great Divergence Analysis
The Great Divergence is an important and urgently needed book. It’s the best single-volume introduction I’ve found to the academic literature on income inequality, and I say that as someone who’s read quite a few books on the subject.
What makes Noah’s book stand out is its fair-mindedness. As one reviewer noted, “Noah retains a healthy skepticism towards any single theory for rising wealth inequality. He shares research on either side of each argument, which makes this book a worthwhile read for both liberals and conservatives”.
The book is also exceptionally well-written. Noah has a journalist’s gift for making complex ideas accessible. The historical vignettes, on Horatio Alger, Walter Reuther, and lobbyist Bryce Harlow, bring the economic analysis to life.
Does It Fulfill Its Purpose?
Yes, mostly. Noah successfully explains how the Great Divergence happened, why it matters, and what we can do about it.
The book has some limitations. As one critic noted, “Noah reports faithfully on what others have written about inequality, but he does not evaluate it critically”. The book is a synthesis of existing research rather than an original contribution to economic theory.
Additionally, some readers may find the middle chapters, which methodically work through each potential cause of inequality, a bit dry. As one Goodreads reviewer put it, “It’s just needlessly dry”. But given the complexity of the subject, this is a minor complaint.
5. Strengths and Weaknesses
What I Found Compelling
- The synthesis of academic research. Noah has read widely and distilled the best work of economists and political scientists into accessible prose.
- The historical perspective. By tracing inequality from the Progressive Era through the Great Compression to the Great Divergence, Noah shows that inequality isn’t inevitable, it’s the result of policy choices.
- The chapter on the “Stinking Rich.” This is the most vivid and memorable part of the book. Noah’s taxonomy of the rich, “Sort of Rich,” “Basically Rich,” “Undeniably Rich,” “Really Rich,” and “Stinking Rich”, makes the data memorable.
- The refutation of American exceptionalism. The data showing that the United States has less upward mobility than most other developed countries is genuinely shocking.
What I Found Less Persuasive
- The policy chapter is too brief. Given the depth of the analysis in the rest of the book, the final chapter feels rushed. Noah’s recommendations are sensible but not developed in enough detail.
- The tension between technology and politics explanations. As one critic noted, Noah sometimes seems to argue that inequality is driven by technology (which is hard to change) and sometimes by politics (which is easier to change). He doesn’t fully resolve this tension.
- The book is now over a decade old. Some of the data is dated, and some of the policy proposals (like the public option for health care) have been superseded by subsequent events.
6. Comparison with Similar Works
The Great Divergence sits alongside several other important books on inequality:
Thomas Piketty’s Capital in the Twenty-First Century (2013) is the academic heavyweight, more technical, more comprehensive, and more daunting. Noah’s book is more accessible. As one reviewer noted, Noah’s book has “the same academic rigor, but with less technocratic financial speak”.
Paul Krugman’s The Conscience of a Liberal (2007) coined the term “the Great Divergence.” Krugman focuses more on the political causes of inequality; Noah provides a broader survey of the economic research.
Jacob Hacker and Paul Pierson’s Winner-Take-All Politics (2010) makes a more explicitly political argument, that Washington created inequality through policy choices. Noah is more ecumenical, giving each factor its due.
Joseph Stiglitz’s The Price of Inequality (2012) covers similar ground but is more focused on the 2008 financial crisis.
Barbara Ehrenreich’s Nickel and Dimed (2001) is a personal, immersive account of life at the bottom of the income scale. Noah’s book is more analytical and focuses on the middle class and the rich.
7. Conclusion
The Great Divergence is essential reading for:
- Anyone who wants to understand the economic forces reshaping America.
- Voters who want to make informed decisions about tax policy, trade, education, and labor law.
- Students of economics, political science, or sociology looking for an accessible introduction to the inequality literature.
- Journalists and policymakers who need a clear, evidence-based overview of the issues.
Final Thoughts
As Noah writes in his introduction, “There is a tradition in our not-too-distant past of fellowship and decency and shared commitment to fair play, a feeling that when the country prospers, everyone should prosper.
That tradition has been slipping away, and hardness and mutual suspicion and belief in markets as the infallible measure of all things have taken its place. That’s a legacy of the Great Divergence”.
This book is a reminder that we can do better, and that we have done better before.
The Great Compression shows that a more equal America is possible. The question is whether we have the political will to make it happen again.
