Gap between rich, poor seen growing

Income disparity reaches highest since 1920s, paper reports, with recent Wall Street boom partly to blame.

October 12 2007: 9:56 AM EDT

http://money.cnn.com/2007/10/12/news/economy/income/index.htm?section=money_mostpopular

NEW YORK (CNNMoney.com) -- The income gap between the wealthiest and poorest Americans grew to its widest level since the 1920s, according to a report published Friday.

Citing Internal Revenue Service data, the Wall Street Journal reported that the wealthiest 1 percent of all Americans earned 21.2 percent of all the nation's income in 2005, up from the previous high of 20.8 percent in 2000.

Conversely, the bottom half of working Americans earned just 12.8 percent of all the nation's income, down from 13.4 percent in 2004 and slightly lower than 13 percent in 2000.

While the IRS data only dates back as far as 1986, academic experts told the paper that the last time the rich had this large of a share of income was during the 1920s.

The figures, based on "adjusted gross income" which incorporates certain deductions such as contributions to individual retirement accounts, revealed that the income level for the tax filer in wealthiest 1 percent of Americans grew 3 percent to $364,657 between 2000 and 2005, according to the Journal.

At the same time, the median American income, however, slipped 2 percent during that same period to $30,881.

Academic experts told the paper that the income disparity among Americans was due a combination of factors including globalization and technical advances, which favor the most skilled workers, while the recent boom on Wall Street was also seen playing a large part.

Leading up to this summer's market meltdown, stocks were on a tear, while the availability of cheap credit helped led not only to big deals, but hefty payouts for workers in the private equity, hedge fund and investment banking businesses.