1914-1918 is the more precise date range that you are looking at for causation.
One of the victims of war is Capital. Much Capital is destroyed in some places, and countries generally begin to do things that look an awful like command economics (i.e. Your factory is a tank factory now, you will make tanks, we will tell you how much you are getting paid. If you resist we will use the propaganda machine to make you look like our enemy). During both world wars the returns on capital were well below the rate of growth, and what would otherwise be expected.
On top of all that, the world wars were huge events for income taxes. If you look at a history of income taxes in the US, you see three local maxima for the top brackets. The Civil War, and the two world wars. The same is true of estate taxes in the UK, for example.
From what I gather a number of factors. As one article puts it: "Social solidarity engendered by the wars, wartime experience of governing the economy, unemployment in the 1930s and the rise of socialist ideas."
Both pension systems and labor unions were first created in the late 1880s/1890s and got a lot of steam in the early 1900s. Similarly with the modern iteration of minimum wages. Both the Nordic Model and Rhein Capitalism were created in the 1930s. On the more extreme spectrum, the Russian Revolution brought communism to Russia in 1917.
In a way you can see this as the fruits of the critique of capitalism by Marx in the 1840s. They grew and took root in light of rising unsustainable inequality and lead to mostly positive reforms that brought down inequality even in societies that retained capitalism at the core. Then the trend reverses as the US starts their war on Socialism and Communism, and Reganomics and Thatcherism become dominant.
I understand how those elements would lead to a decrease of wealth inequality past 1920/30, but it doesn't directly explain why the decrease seems to start before World War I.
If the unionizing and minimum wage movement was the cause of the big drop, wouldn't the drop have started before 1910?
