Summary

Income inequality has risen sharply in California over the past two decades, increasing faster in the state than in the nation as a whole. The growing gap between rich and poor in California results not only from rising incomes among the well-off but also from a precipitous drop in income among those in the mid-to-lowest levels of the income distribution. This study examines a number of possible explanations for the growing divergence in earnings among male workers in California. The study finds that immigration and rising returns to skill account for more of the widening gap than any of the other possibilities considered.