In many developed economies, income and wealth inequality have risen noticeably since roughly the 1980s, reversing a period of relatively narrowing gaps in the decades before. Economists generally point to several overlapping forces, rather than any single cause, to explain this shift.

The leading explanations economists point to

Skill-biased technological change describes how technology has increasingly rewarded highly skilled, highly educated workers disproportionately more than less-skilled workers, widening the pay gap between the two groups. Globalization - the international affairs module’s broader focus - increased competition for many domestic manufacturing jobs, putting downward pressure on wages in industries newly exposed to global competition. And declining union membership in many countries has reduced organized labor’s collective bargaining power over wages, particularly for less-skilled workers.

Why economists still debate the relative weight of each factor

Separating out exactly how much of rising inequality is attributable to technology, globalization, policy changes like tax rates, or declining union power is genuinely difficult, since these forces overlapped and interacted across the same time period. Different studies, using different methods and data, have reached somewhat different conclusions about the relative size of each factor’s contribution.