Income Inequality in America

Income inequality relates to the disparity between the wealthy and the poor. America has the most uneven wealth and it's growing very rapidly between the haves and haves' nots. The primary reason as to why income is spread unevenly is because of the disparity between classes. the upper class, middle class, and lower class. This essay will discuss classes, skilled and unskilled workers, education, and cause of income inequality.

The impact of the diminishing middle class is evident in the corresponding shrinkage of average income jobs. Numerous jobs that are considered routine and once were necessity to everyday life are now disappearing. High school students should be upset, due to the fact they will have fewer economic opportunities than their parents did. Furthermore, my son who will be going to high school next year will have more difficulty climbing the economic ladder and achieving higher financial status with every passing year. ln increasing numbers, individuals born into the middle class are finding themselves pushed into the lower class as the number of middle-class jobs decreases. The American dream, or the foundation of American economics, is now becoming overwhelmingly out of reach. Most people who are considered middle class do not even own their own home, they spend most of their income on renting. This is also part of the wealth gap, having no backing.

There is a polarization between the wages of skilled and unskilled workers that has taken a hold of the income inequality Thus, people who are unskilled usually don't get paid as much as skilled workers because they don't have the same knowledge level. advanced countries like the United States have more skilled workers therefore, the demand and wages would increase because of skilled workers, This means there are more skilled workers who have the knowledge to do more than unskilled worker which raises the demand and wages, while unskilled workers demand and wages goes down. This is what causes the income inequality, because of the skilled workers compared to unskilled works. Unskilled workers are expected to have a decrease on their demand and wages because skilled workers have the knowledge to overpower the unskilled. education is another issue that drives the gap of income inequality in the United States. People who live in a wealthier household usually have a better education. For instance, they could afford better school districts, therefore, they could learn better. Unlike the poorer household, the wealthier households have access to resources the poorer household can't afford. If everyone gets the same level of learning efforts the income inequality remains constant. Therefore, if the lower and higher social classe's have the same level of knowledge than they both would make the same income to an extent, therefore, there wouldn't be the gap in income inequality. Thus, the social classes have a motive of status seeking. The wealthier agents want to improve their relative positions to achieve more than the lower agent's position (Hillman, 2009). Further explanation, wealthier agents and poorer agent's actions affect one another because they see each other's achievements causing them to want to better themselves. Saying that it is a good thing because the lower income individuals would try harder which would lessen the gap of income inequality, but then higher income individuals still have the resources to better them than the lower income individuals. On the contrary, without education, corruption happens; workers that are skilled and unskilled have unbalance wages. So, at the end education plays the major role because workers who don't have the knowledge are being treated unfairly, and corruption is happening because they don't have the knowledge to stop it.

All in all, income inequality damages the wealth-making potential of individuals and therefore it is damaging our economy. But lessening the gap is good for the economy, because everyone can make wealth. In my opinion, if everyone has the same wealth making potential then we wouldn't have a problem with the income inequality. Just like I mention, if higher and lower income individual's actions affect one another it could lessen the gap in between the income inequality, because the lower income individuals are trying to achieve to the same level as wealthy individuals. Also, I think that the income inequality gap has to do with the unfairness of certain things. For examples, the tax system and lobbying government officials is the unfair because it doesn't benefit the lower income individuals, thus, leaving the gap in income inequality. This just proves that the income inequality is bad to an extent because wealthier people have the resources to make it that way. Overall, income inequality is bad and good to a certain extent either way.

In his speech on income inequality, Obama also declares, The idea of success doesn't depend on being born into wealth or privilege, it depends on effort and merit. Although the potential is there, people may not realize it and will end up taking any job they feel comfortable in. Once again, if someone is dedicated enough and puts in the effort, they have the opportunity to achieve a success of great stature.

Income inequality is necessary for a capitalist society to thrive as it provides competition, hard work, and innovating ideas. Inequality is necessary to encourage entrepreneurs to take risks and set up new business. If an entrepreneur sets up a business, he may become a millionaire, but also will create jobs and provide incomes for other workers. There may be a gap between the highest and lowest earners, but the lowest earners are still better off than without the entrepreneur (Amadeo). German economist Karl Marx described a system in which a small percentage of people who controlled large amounts of capital, made the most important economic decisions. Marx's theories, known as Marxism, say that economic societies progress through class struggle. A conflict between an upper ownership class that controls production and a lower labor class that provides the labor for production is necessary. Although Marx's theories were developed in the 19th century, many of the same principles apply today. In the world power known as the United States, production and consumerism are huge industries that are crucial to the economy. The fact of reality is we need income inequality. Without an overpowering wealthy class controlling corporations and a lower class performing all the labor for these businesses, a successful economy centered on production and consumerism is just not possible. The United States needs a lower class to perform work that is required to run a mixed economy.

Although income inequality is an obvious factor in today's economy, I believe nothing should be done to change it. In any diverse economic environment, income inequality will exist due to the rise of some economically successful people and the further development of factors that push people into poverty. Although it may not seem fair that there are rich people blowing money on impractical and meaningless things while people live in poverty, it's a reality that the United States has experienced for centuries ( Amadeo).

In 1976, the wealthiest one percent of Americans owned 19% of all the private material wealth in the US Today, they own over 40% of all wealth. Their share now exceeds the wealth owned by the bottom 92% of the US population combined. (Edward N. Wolff, Top Heavy: A Study of Increasing Inequality in America Twentieth Century Fund: 1995).

Income inequality is usually measured by Gini coefficient According to this method coefficient varies between 0 and 100; while 0 represents complete equality (income is distributed equally among all the population of the country), 100 represents complete inequality (only one person receives all the country's income, while the rest of the population receives nothing). According to the Census of Bureau, the official Gini coefficient in the U.S. was 46.9 in 2010. The first era of income inequality in the United States lasted from post-civil war to around 1937, but in the following ten years income inequality fell dramatically.

Between the end of World War II and the late 1970s, income inequality in the U.S. was reduced; but since 1970s, the situation with wealth distribution has changed. Data from tax returns in 1976 show that the top 1 percent of households received 8.9 percent of all pre-tax income. In 2008, the top 1 percent's share had more than doubled to 21.0 percent

In the years from 1979 to 2009, the top 5 percent witnessed large increases in income, while the lowest-income fifth saw a decrease in real income.

Between 2009 and 2012, income gains by the top one percent increased by over 30 percent, while for the rest income went up by less than half a percent (Income Inequality).

Causes

Competition with other countries, corporate greed, tax policies, and technological growth are the primary causes of income inequality.

U.S. companies must compete with lower-priced Chinese and Indian companies who pay less to their workers. Due to this fact, the U.S. has lost 20% of its factory, traditionally higher-paying union jobs since 2000. In addition to that, service occupations have increased, but workers get paid less. During the 1990s, companies went public to gain more funds to invest on growth. In order to satisfy stockholders, managers are forced to increase profits. Payroll led to less full-time employees and more contract or temporary employees. Recent government tax policies have helped investors more than low wage earners. Since there have been cuts in government regulatory agencies, there are fewer investigations of labor disputes. In addition to that, minimum wage remained the same until 2007. Since inflation increases price on basket of goods and services, lack of wage increase contributes to income inequality due to the value of their money that is decreased over the time (Amadeo, 2014).

Conclusion

The rich will remain at a greater distance when America taxes the people all the same percentages no matter what their pay is. Until we see a change in the way wages are distributed and taxes are collected, we will continue to see poor remaining poor and wealthy remaining in wealth. Raise the taxes on the wealth and raise the wages then call on the government to build an even more balanced gap in order to avoid what was seen between 1970's and the late 90's. A positive outlook to income inequality is that it will allow our country to keep pushing forward to ensure that we can continue to build on the economy and strive to keep creating jobs that are built to last. A negative aspect to income inequality is that the wealth will be getting richer while the middle class and poor will continue to fight just to make ends meet and try to bridge the gap.

Reference

International Encyclopedia of Public Policy Volume 3-Public Plicy and Political Economy: Phillip O'Hara

Hillman Arye L. (2009) Pubic Finance and Public Policy Responsibilities and limitations of Government: 2ns Ed.

Obama, Barack. Obama's Powerful Speech on Income Inequality. THEARC. Washington, D.C. 04 December 2013.

Amadeo, Kimberly. Income Inequality in America. Causes of Income Inequality. About.com US Economy. February 14, 2014. Web. March 5, 2014.

Inequality, and Growth. Economic Theory. Vol. 39. Springer, 2009. 269-289. Print. 20 Nov. 2013

(Edward N. Wolff, Top Heavy: A Study of Increasing Inequality in America Twentieth Century Fund: 1995).

Inequality.org March 24, 2014. Web. February 14, 2012. This article explains that income inequality is measured by Gini coefficient. According to results of Gini coefficient the income inequality in the United States has become a serious issue.

Cite this page