The continuous rise of inequality particularly in the growing concentration of income at the top level of distribution in the United States has become a great focus of assessment for economists and policy makers. Skilled workers struggle to improve their income compensation by integrating higher level of schooling with on-the-job experience to boost their opportunity and gain the edge in this competitive labor market. Understanding the factors behind this phenomenon is essential to determine whether policy action is needed to reduce income inequality while taking into account other policy objectives. Since the problem won’t be solved without understanding the origin of the problem which is still a battle for economists and policy makers. This analytic paper will take into account the causes of the rise in income inequality in the United States, focusing on the relationship between labor market institutions investment decisions and the effect it has on distribution of income.