The American economic pie keeps getting bigger, but the slice handed to the average American family is getting smaller.

The latest evidence of this trend comes from government figures on corporate profits as crunched by the Economic Policy Institute. Corporate profits last year gobbled up 10 percent of gross domestic product, the highest share since bell-bottoms were in fashion in 1968.

This is, of course, marvelous for stock market investors and for corporate executives with paychecks linked to profits and stock prices. But it's not necessarily good news for everybody else.

As corporate profits take bigger and bigger slices, the share of the national economic pie left for wages and benefits tends to shrink. And that slice isn't evenly distributed.

The average American family is getting pinched. The Census Bureau measures median household income in three-year averages. Median means the point at which half of households are higher and half are lower. For 2002-2004, the median family earned $44,473. That was down from $45,750 from 1999 to 2001.

There's little indication that things improved last year. Wages make up the bulk of family income, and wages for that middle-income family fell 1.3 percent behind inflation last year.

Historically speaking, this is highly unusual four years into an economic recovery. In fact, with the economy growing at 3.5 percent and unemployment now at 4.8 percent, wages normally would be rising and families feeling prosperous. Instead, the benefits of growth are going only to the very well-paid and to corporate profits.

There are many reasons for this. In part, it's due to the fact that good-paying factory jobs continue to disappear. American factory output is up 13 percent since 2001, but factories are much more efficient, requiring fewer workers to get more done. Productivity — output per hour worked — is up 24 percent in the same period. "We're making more stuff with fewer people," wrote chief economist David Huether of the National Association of Manufacturers in a recent column in BusinessWeek. Overall, U.S. factory employment is at a 50-year low.

Meanwhile, global competition is holding down prices and wages. Workers are losing bargaining clout as unions lose members. Unions now represent just 8 percent of private industry employment. Consequently, less-educated workers are being Wal-Mart-ized into low-wage service jobs.

There may be hope on the horizon. After being burned in the 1990s tech bubble, American companies have been slow to invest in either new equipment or new people, says senior economist Patrick Fearon at A.G. Edwards. But economic growth will soon force their hand on hiring, and rising demand for workers should raise wages.

"We're probably close to the point where there will be a take-off in investment and wage growth," Fearon says.

That will be good news for many American families. The gulf between the rich and everyone else has been widening for most of the past two decades. If that trend continues, it will be a demagogue's dream: fertile ground for the seeds of mass discontent that could yield jarring political and social change. A robust economy with rising wages for all families — and a smaller gap between the rich and the rest of us — is preferable.