Episode 4: The Rise of Extreme Wealth Concentration
In the previous article, I explained how the United States experienced high living standards between 1945 and 1970, how external economic shocks led people to misinterpret why those living standards began to fall, and how, between 1980 and 2025, the country embraced policies that reduced living standards for the average American while dramatically increasing income for CEOs and wealthy families.
This article introduces the central concept of this series: wealth concentration.
Many people discuss this issue using the term “wealth inequality,” but wealth concentration is more precise and less misleading. The core problem is not inequality in the abstract, but the extreme concentration of wealth at the top. If the top 10 percent owned 30 percent of all wealth, the distribution would be unequal, but not extreme. If the top 10 percent owns 70 percent of the wealth (as it does in the United States), the concentration is extreme.
That level of concentration has real consequences. It does not merely rearrange numbers on a spreadsheet. It reshapes the material and emotional realities of ordinary families.
To understand how wealth became so concentrated, it helps to revisit the policy changes discussed previously. Beginning in the 1980s, wages for average workers stagnated while compensation for executives rose dramatically. Between 1980 and 2025, real wages increased by about 12 percent when adjusted for inflation. Over the same period, real CEO compensation increased by roughly 1,200 percent. CEO pay grew approximately twelve times faster than worker wages.
More striking than executive compensation, however, was the growth in asset values. Assuming dividends were reinvested, the real value of the S&P 500 increased by roughly 3,000 percent over that same period. Asset values grew about twenty-eight times faster than wages.
Several structural changes explain this divergence.
One of the most important was deregulation. Prior to 1980, the United States maintained a regulatory framework designed to preserve competition. Competitive markets benefit consumers and workers by pushing companies to lower prices, improve quality, and offer better compensation to attract skilled employees.
After 1980, many of these regulations were rolled back. Large corporations began merging with or acquiring smaller competitors. The airline industry illustrates this shift clearly. Where there were once a dozen or more major airlines, four companies now control approximately 80 percent of U.S. air travel.
This kind of market structure is known as an oligopoly, in which a small number of firms dominate an industry. Oligopolies reduce competition and raise prices because consumers have limited alternatives. When all major firms keep prices high, customers must either pay more or forgo the service.
Corporate consolidation also creates monopsony power. A monopsony occurs when a small number of firms control most employment opportunities in a sector. For example, a commercial airline pilot in the United States has very few employment options outside the major carriers. In monopsonistic labor markets, workers compete for jobs, which suppresses wages.
Deregulation in industries like airlines, telecommunications, banking, and media produced both oligopolies and monopsonies. Prices rose for consumers, wages fell for workers, and profits increased for owners. These dynamics contributed directly to the extreme levels of wealth concentration in the US today.
Alongside consolidation, companies increasingly adopted anticompetitive labor practices. One common example is the non-compete clause. These contracts restrict employees from working for competitors after leaving a job. Non-competes severely weaken workers’ bargaining power. If an employee cannot credibly threaten to leave for higher pay elsewhere, employers have little incentive to offer raises.
Another common practice in the 1980’s involved “no-poaching” agreements, in which companies secretly agreed not to hire each other’s workers. This further reduced labor mobility and suppressed wages by eliminating competition for employees.
At the same time, firms sought to reduce labor costs by shifting away from full-time employment. Many replaced full-time jobs with part-time, contract, or gig work to avoid paying for benefits such as healthcare, pensions, and payroll taxes. This transferred costs and risks from employers to workers, increasing wealth concentration while lowering living standards.
Financial deregulation also played a critical role, particularly through the rise of stock buybacks. Before the 1980s, stock buybacks were largely illegal. As financial regulations were relaxed, buybacks became a routine corporate practice.
When companies earn profits, they have several options. They can reinvest in the business by expanding operations, upgrading equipment, or increasing wages. They can distribute profits as dividends. Or they can buy back their own shares from the market. Historically, companies primarily reinvested profits. After 1980, corporate strategy shifted toward maximizing shareholder value, which meant a focus on stock buybacks.
Stock buybacks raise share prices by reducing stock supply and increasing demand (I explain this better in the video). This benefits existing shareholders by increasing the value of their holdings. In the United States, the top 10 percent of households own roughly 93 percent of all stocks. Buybacks therefore function as a mechanism for transferring corporate profits to wealthy asset holders.
Because these gains appear as asset appreciation rather than income, they are significantly tax-advantaged. Companies can even finance buybacks with borrowed money through leveraged recapitalizations. While this boosts share prices in the short term, it weakens company balance sheets, reduces resilience during economic downturns, and undermines workers’ ability to negotiate raises. Job security declines as firms become more financially fragile.
Another factor amplifying wealth concentration is the erosion of the minimum wage. Since the 1980s, the federal minimum wage has lost about 40 percent of its purchasing power. Beyond affecting low-wage workers directly, the minimum wage sets the wage floor for much of the labor market. When the floor is low, wages just above it remain suppressed.
Raising the minimum wage lifts compensation across the lower tier of earners without increasing executive pay or asset prices. As a result, minimum wage increases reduce wealth concentration while improving living standards.
Altogether, these changes created diverging paths of wealth accumulation. Wealthy households held assets that appreciated rapidly, while most working households relied on wages and, at most, home equity. Economists describe this as a K-shaped economy: asset values rise sharply while wage purchasing power stagnates or declines.
Because economic resources are finite at any given time, greater concentration at the top necessarily means less for everyone else. As asset prices grow faster than wages, the share of total wealth controlled by the top 10 percent increases each year.
Spending behavior further reinforces this dynamic. Ordinary households spend most of their income on goods and services. A person earning $60,000 per year might spend nearly all of it on necessities, with perhaps 10 percent available for savings or investment.
Wealthy households operate under entirely different constraints. A billionaire whose assets grow by just 5 percent annually gains $50 million in a year. After living expenses, the vast majority of that income is reinvested in additional assets. As a result, ordinary households primarily purchase goods and services, while wealthy households primarily purchase assets. The more wealth one has, the easier it becomes to accumulate even more.
Relative purchasing power matters more than nominal wages. A 5 percent raise does not improve living standards if asset prices rise by 10 percent. A household earning $50,000 that receives a raise to $52,500 may still fall behind if housing prices rise from $300,000 to $330,000 over the same period.
Housing illustrates this problem clearly. The wealthiest 10 percent of Americans own approximately 45 percent of all housing. As housing is increasingly treated as an investment asset, prices rise faster than wages, reducing affordability for everyone else.
By 1989, the top 10 percent of U.S. households controlled about 44 percent of total wealth. By 2023, that figure had risen to roughly 67 percent. As wealth concentrates at the top, fewer resources remain available to the rest of the population. Young adults face persistent financial strain, and these conditions triple the risk of depression.
Wealth concentration explains why living standards have declined, why anxiety and depression have increased, and why economic stress now dominates the mental health landscape. These outcomes are not inevitable. They are the result of policy choices, and policy choices can be changed.
The next article will focus on how this system can be repaired and what steps are necessary to improve living standards so future generations do not inherit an economy that systematically undermines their mental health.