Inequality of income and wealth is a growing concern in modern society. For decades, differences between the affluent and poor have been progressively expanding, with the associated economic and social implications becoming increasingly apparent. The purpose of this essay is to assess the causes and consequences of income and wealth disparities in the United States from 1940 through 2020. This paper will provide one strategy for federal policymakers to lessen these inequities by assessing available research and statistics.
Income inequality may be quantified using a variety of approaches. The Gini coefficient, the 90/10 ratio, and the revenue share of the top 1% are examples of these. The Gini coefficient, which runs from 0 (total equality) to 1 (total inequality), is one of the most extensively used indicators of income inequality (Ndulo & Assié-Lumumba, 2020, p. 69). More income disparity is indicated by a higher Gini coefficient. The 90/10 ratio is used to measure the income of the top 10% of earners to that of the poorest 10% (Ndulo & Assié-Lumumba, 2020, p. 69). The top 1% income share relates the top 1%’s income to the overall income received in a nation (Ndulo & Assié-Lumumba, 2020, p. 69). These indicators give several views on income disparity and can be used to guide policy decisions aimed at reducing inequality. In conclusion, the Gini coefficient, the 90/10 ratio, and the income distribution of the top 1% are all techniques for measuring income disparity. Investing in policies targeted at lowering income disparity can help reduce income inequality, leading to better possibilities for people and a healthier economy overall.
The 90/10 ratio is the most often used metric of income disparity among researchers. For example, according to Horowitz et al.’s study “Trends in Income and Wealth Inequality,” income inequality in the United States has risen since 1980. The 90/10 ratio has dramatically increased over time, from 9.1 in 1980 to 12.6 in 2018. (Horowitz et al., 2020, para. 38). When evaluating the trend, it is possible to conclude that it is alarming since it implies that the economic disparity between the richest and poorest Americans is expanding.
The Gini coefficient, which determines the level of disparity in a country’s income distribution, reflects this tendency as well, with a higher figure indicating a more significant distinction. For example, in 2016, the estimated Gini coefficient in the United States was 0.481 (Horowitz et al., 2020, para. 12). Since a Gini coefficient of 0 represents total equality, and a value of 1 shows total inequality, where one household has all of the money or possessions while all others have none, this statistic implies that income inequality in the country is very significant. Furthermore, the authors claim that the Gini coefficient in the United States grew by nearly 20% between 1980 and 2016. (Horowitz et al., 2020, para. 12). Based on this data, the trend in the United States indicator of income inequality from 1940 to 2020 has been toward higher inequality. As a result, the evaluation indicates that this tendency raises concerns regarding economic prospects and mobility for persons at the bottom of the economic ladder.
Additionally, the income disparity trend is particularly prominent among higher-income households. From 1981 to 1990, the richest 5% of households’ income increased at a pace of 3.2% per year, while the bottom quintile’s income decreased by 0.1% per year (Horowitz et al., 2020, para. 21). In the 1990s, the wealthiest 5% of households fared even better, with their income increasing at an annual average rate of 4.1%, compared to 1% or marginally more for other individuals (Horowitz et al., 2020, para. 22). From 2000 to 2018, yearly average family income rate dropped to 0.3%, although the wealthiest families in the United States continued to outperform other families (Horowitz et al., 2020, para. 5). From 1998 to 2007, the average net worth of the wealthiest 5% of American households climbed from $2.5 million to $4.6 million, nearly double the 45% gain in wealth of the top 20% of families altogether (Horowitz et al., 2020, para. 33). These figures indicate that income inequality in the United States is on the upswing, and that income growth has benefitted the highest incomes in recent decades.
The studies discuss the growing concern among researchers, policymakers, and politicians about the increasing economic inequality in the United States. According to a survey by Biewen and Seckler (2019), the rise of globalization and the expanding use of technology has contributed to the widening gap between the wages of high- and low-skilled workers. Globalization has led to the outsourcing of many low-skilled jobs to countries with lower labor costs, leaving fewer job opportunities for low-skilled workers. At the same time, technological advancements have increased the demand for high-skilled workers while reducing the need for low-skilled workers. This effect has resulted in a significant increase in the wages of high-skilled workers, while wages for low-skilled workers have stagnated or declined (Acemoglu & Restrepo, 2021). Overall, it can be concluded that globalization and technological advances have played a significant role in widening income inequality in the United States.
The effect of globalization and technical improvements is one of the reasons leading to this problem, but other factors also contribute to it. As such, Horowitz et al. (2020) offer evidence that the growth in economic disparity since 1980 is partly due to these issues, as well as the fall of unions and the deteriorating value of subsistence wages. The paper contends that income disparity may lead to fewer opportunities and mobility for those at the bottom of the economic ladder, a phenomenon known as The Great Gatsby Curve (Horowitz et al., 2020). Finally, the article emphasizes the detrimental impact of inequality on the political power of the poor, regional division by income, and the economic expansion itself.
Wealth inequality and income inequality are two separate but related metrics of economic inequality. The unequal distribution of wages among people or households is referred to as income inequality (Amacher & Pate, 2018). In contrast, wealth disparity refers to the unequal distribution of assets without liabilities or obligations (Amacher & Pate, 2018). Since money is more concentrated in the wealthiest individuals, wealth disparity has a more significant impact than income disparity (Amacher & Pate, 2018). This concentration of wealth may result in a variety of economic and social issues, including restricted chances for the less rich to enhance their standard of living, a lack of spending on public goods, and political imbalance.
Moreover, wealth disparity has the potential to influence future generations. Wealth concentration can lead to insufficient expenditure on schools, health care, and other necessary services, reducing social mobility and sustaining inequality for future generations (Christophers, 2021). Furthermore, wealth concentration can result in the formation of a financial elite who utilize their wealth and status to influence political choices, resulting in laws that favor the wealthy over the less fortunate (Christophers, 2021). As a result, reducing wealth disparity is critical for establishing a fair and equitable society.
The inequality of wealth in the United States has grown over the last many years. Upper-income families’ share of collective wealth increased from 60% to 79% from 1983 to 2016, while middle-income families’ part fell almost in half from 32% to 17%, and lower-income households had only 4% of the cumulative wealth in 2016, down from 7% in 1983. (Horowitz et al., 2020, para. 31). From 1998 to 2007, the average net worth of the wealthiest 5% of U.S. families climbed from $2.5 million to $4.6 million, indicating an increase in wealth disparity (Horowitz et al., 2020, para. 31). Even after the Great Recession, the wealth disparity between the richest and poorest households in America more than doubled. In 1989, the wealthiest 5% of households had 114 times the wealth of the middle quadrant, $2.3 million compared to $20,300, and by 2016, this proportion had risen to 248 (Horowitz et al., 2020, para. 36). As a result of increased inequality, those in lower economic strata may have less financial freedom and flexibility.
Overall, the tendency of rising wealth disparity in the United States demands more attention and explanation. As such, wealth concentration leads to political inequality, with the interests of the rich taking precedence over those of the less fortunate. Furthermore, when the rich amass more resources, they may be able to utilize their money to produce more wealth, sustaining wealth concentration over time. This dynamic can create a vicious circle of inequity that is hard to eradicate. High levels of wealth disparity, in the end, harm social stability and economic progress by restricting options for those who are not currently affluent.
Inequality in the United States has risen in recent decades, and there are multiple causes for this. One of the primary causes is the unequal distribution of educational possibilities, which leads to income and wealth inequality. Strauss (2017) found that educational attainment is substantially associated with income levels, with persons with greater levels of education earning much more than those with fewer qualifications. Additionally, according to Strauss (2017), unemployment statistics and educational achievement are closely associated, with better-educated persons seeing lower jobless rates even during recessions. This theory indicates that there is a strong demand for highly educated people and a low demand for individuals with fewer qualifications, resulting in income and wealth discrepancies. Significant relationships between education, wealth, and unemployment support this notion. Other aspects, like globalization, technological progress, and changes in tax regulations, should be addressed while evaluating it. As a result, while Strauss’ theory offers valuable information, it is critical to examine numerous aspects when assessing the causes of wealth disparity.
Furthermore, tax loopholes have long been a source of contention in the debate over the origins of wealth disparity. While some regard tax loopholes as a method for the rich to escape paying their fair share of taxes, others see them as an essential tool for stimulating growth in the economy (Alm, 2021). Notwithstanding this, it is crucial to remember that the effect of tax loopholes on wealth disparity is not apparent and is likely to be impacted by a variety of other variables. As such, past discrimination trends, gaps in educational opportunities, and structural biases within the market structure can all contribute.
Healthcare disparity significantly contributes to income and wealth inequality in the United States. Inequalities in healthcare availability and efficacy, according to Abedi et al. (2021), are frequently associated with income and wealth differences since persons with limited earnings are more likely to lack appropriate healthcare insurance and have access to healthcare services. This insufficient access to healthcare can have negative health consequences, such as higher morbidity and death rates, as well as aggravate pre-existing health issues. Moreover, healthcare costs can be a considerable financial drain for low-income families, leading to higher debt and decreasing monetary sustainability (Abedi et al., 2021). These variables contribute to general economic disparities across the country because those with lower incomes and fewer assets have less opportunity to utilize vital medical care and are more likely to have unfavorable health outcomes as a result. As a result, the evaluation found that healthcare disparity is highly linked to income and wealth inequality in the United States. Thus, addressing healthcare disparity is critical for lowering income and wealth inequality in the United States.
Given the information that has been presented thus far, it is reasonable to infer that those who have private health insurance have a substantially larger net worth than those who do not. Based on data from the U.S. Census Bureau (2022), the wealth difference between those who have the benefit of personal insurance compared to those who do not may be estimated. The cost of private insurance can be considerable, and individuals who do not have access to it may be unable to pay it. In 2021, 8.3% of the population, or 27.2 million individuals, lacked health insurance at some time during the year, compared to 91.7% of those who had coverage for all or part of the year (U.S. Census Bureau, 2022, para. 1). The poverty incidence of 11.6% and the Supplemental Poverty Measure rate of 7.8% indicate that a sizable section of the population may not be able to buy private insurance (U.S. Census Bureau, 2022, para. 1). As a result, it is probable that there is a significant wealth gap between those who have possession of personal insurance as opposed to those who do not.
As previously stated, healthcare disparities are a significant factor in income and wealth inequality in the United States. Those with low incomes are more likely to lack sufficient healthcare insurance and have restricted access to healthcare services. Hence poor access to healthcare is typically related to low income and wealth (Abedi et al., 2021). Inadequate availability of medical care can have severe health repercussions, such as increased morbidity and mortality rates, as well as exacerbate pre-existing health concerns. Additionally, healthcare expenditures can be a significant financial burden for low-income households, resulting in increased debt and decreased economic sustainability (Abedi et al., 2021). Therefore, the evaluation suggests that increasing access to low-cost or public healthcare has the ability to minimize income and wealth disparities. Providing all Americans comprehensive healthcare coverage, whether through a government plan or a single-payer program, would assist in resolving healthcare inequities and creating more economic equality. However, it is crucial to emphasize that healthcare is only one element contributing to income and wealth disparity. Supplementary policies addressing education, labor, and taxation may be required to solve this complicated issue.
As a government policymaker, one possible recommendation for lowering income or wealth disparity would be to raise taxes on the most prosperous individuals and businesses. This approach would aid in the redistribution of wealth and the provision of more resources for social welfare programs aimed at decreasing inequality, such as schools, medicine, and cheaper housing. Furthermore, initiatives that promote educational and vocational opportunities for people from low-income families might assist them in improving their economic potential and minimizing income disparity. Finally, instituting minimum wage increases and supporting unions might help raise salaries for low-skilled employees while reducing wealth disparities. It is vital to stress that any policy aiming at lowering income or wealth disparity must be carefully planned in order to prevent unintended effects, and it must be founded on a comprehensive understanding of the root causes of inequality.
In conclusion, since 1980, income and wealth inequality in the United States has been climbing, indicating growing economic imbalance. Globalization and technological improvements have contributed to the United States’ growing economic disparity, resulting in fewer employment prospects for low-skilled people. Wealth disparity has a more considerable impact than income inequality, and it is worsening in the United States. Inadequate access to healthcare is intimately related to income and wealth inequality, and limited access to healthcare can have severe health repercussions. Increased access to low-cost or socialized medicine has the potential to reduce income and wealth inequality. As a federal policymaker, one possible recommendation for reducing income or wealth disparities would be to raise taxes on the most affluent people and companies. Additionally, it is proposed to promote educational and professional opportunities for low-income families and support unions in their efforts to raise wages for low-skilled workers while reducing wealth disparities.
References
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