Early economists often associated income inequality with capitalistic societies, such as America and Western European countries. This is why such inequality has been synonymous with the American economy for decades. Statistics show that more than 40% of the country’s wealth belongs to only 10% of the population (Sommeiller 1). Monrone and Kerg (12) also say the income of the wealthiest 1% Americans has increased by 154% (in the last five years), while the income of the rest of the population has only grown by 17%. As income continues to divide people further apart, history shows the difficulty of bringing people together if these inequalities persist (Sommeiller 11; Monrone & Kerg 4).
Income inequalities in America have come at a high economic cost to Americans because findings from the Economic Policy Institute (cited in Sommeiller 12) show that if the average household income in America increased at the same rate as economic growth, between 1979 and 2007, Americans would be enjoying a 27% higher average household income today. In fact, the same institution blames the top 1% for this loss of income because their high increases in household income have eroded the same gains that would have benefitted middle-income families (Sommeiller 16).
This outcome mirrors the tragedy of the commons concept, which dictates that a selected group of people who work rationally and independently, but for their selfish gains, are likely to create greater impoverishment in the society by depleting common natural resources at the expense of the others (Hardin 1243; Monrone & Kerg 24). The economic strides made by America’s rich people mirror this tragedy because they have managed to increase their wealth at the expense of low-income people.
Although many books and articles highlight the effects of income inequality in different societies, there are few thoughtful insights regarding the problem of income inequality. This paper seeks to fill this research gap through a balanced critical analysis of arguments advanced by supporters and critics of income inequality. In this assessment, the key issues include a discussion of whether we should consider enshrining economic equality as a tenet of the American bill of rights; how income inequality relates to the American dream, and how income inequality interacts with American ideals of equality and democracy.
What do the Critics of Income Inequality say?
Income inequality has become a common cause for concern in America. Researchers have debated the social and political implications of income inequality in the United States (U.S.) in different forums (Sommeiller 1; Monrone & Kerg 24). Their results touch different fields, including psychology, finance, and health. For example, research shows that income inequalities are associated with health problems (Sommeiller 3).
Inequality also threatens America’s social fabric as it could lead to discontentment and economic frustrations among communities. Friction could also occur among the “haves” and “have-nots” because, economically, research studies show that income inequalities could cause lower worker productivity and efficiency (Sommeiller 3). Developing nations that have capitalistic economies could also suffer from increased corruption because of income inequalities. Particularly, this outcome is true for countries that could easily exchange money for political power. Consequently, corruption could lead to inefficient allocation of resources and distorted investment plans in these economies (Monrone & Kerg 21).
Unchecked income inequalities could also lead to further income gaps, especially if the rich are in positions of influence where they could formulate policies that increase their wealth, at the expense of low-income people. The gaping economic inequality in the American society has also curtailed the growth of the middle class by limiting living standard growth. Poor intergenerational income mobility also stems from income inequality in America. This socioeconomic discrepancy stems from the increased odds of children from wealthy families to continue being rich at the expense of poor and middle-income families who have a high probability of living in the same economic situation as their parents.
What do Supporters of Income Inequality say?
Some researchers posit that income inequality effects are not entirely negative. For example, they say income inequality gives people the incentive to work harder in pursuit of more wealth (Sommeiller 11). In this regard, they believe that income inequality could help to bolster economic growth through increased investments. For example, Monrone & Kerg (42) says, as the rich get richer, their accumulated wealth is a driver for increased investments and savings. Advocates of supply-side theories champion this view (Monrone & Kerg 46).
However, economic statistics, which do not link increased wealth accumulation with increased economic growth, have undermined their view (Sommeiller 8). Some supporters of inequality also believe that inequality is merely a part of a dynamic and robust economy. They say inequality reflects human nature because people are bound to have different work ethics and varied commitment levels to their jobs (Sommeiller 8).
Therefore, they are bound to register different economic outcomes. Such views are upheld by researchers, such as Richard Epstein (cited in Sommeiller 18), who argued against the Occupy Wall Street movement by saying that taxing the rich would lead to job losses. He also said that although income inequalities may exist in the American society, increased wealth creation is a fair consequence of the outcome (Sommeiller 17).
Similar to other scholars who support the capitalist system, Epstein argued that income inequalities created wealth, which was important for increasing new business ventures (Sommeiller 19). Some studies have supported this view by drawing a link between tax reductions for wealthy people and increases in job creation (Monrone & Kerg 46). Other research studies have supported the same studies by finding no link between economic growth, or the lack of it, and income inequalities (Monrone & Kerg 46). In fact, this finding questions the entire premise of advocating for income equality because income equality would not necessarily translate into economic gains.
Discussion
Based on the findings highlighted in this paper, there are people who argue for and against income inequality. Indeed, while some of them believe such inequality is detrimental to the American society, others believe it is pivotal in spurring economic growth. Although some economic analysts believe that income inequality is not necessarily bad, market evidence shows that they have a flawed argument because there has been a significant reduction in savings among middle-income earners in the past decade (Sommeiller 15). In fact, economic statistics show that 20% of this population saves nothing at all (Sommeiller 15).
This trend is increasing. Therefore, there are inadequate savings to spur growth (through income inequalities). Albeit this discussion is essential in understanding the challenge of income inequality in the U.S., a deeper discussion needs to occur to understand how income inequality interacts with American constitutional rights and democratic ideals. These discussions appear below.
Equality as a Constitutional Right
The American constitution has often protected citizens’ rights through constitutional provisions. So far, Americans enjoy many rights, including the right to own property, the right to life, the right to bear arms, and the right to enjoy other freedoms. Since some of these rights depend on economic prosperity, it is plausible to argue that the bill of rights could accommodate the right to economic equality. Some people associate this right to social rights (Dawson 111-112).
Such a legal provision could reduce the income gap between the rich and the poor. However, advocating for economic equality could be overstretching the limits of civil rights because the American population is diverse. People have different cultural interests that affect their ability to “make a living.” Furthermore, economic activities rely on varied socioeconomic parameters, such as education, talent, and skill. These issues are diverse. Therefore, no common factors cause economic prosperity.
Concisely, economic issues bring many unconventional problems to our understanding of the bill of rights. The difficulty of legislating economic parity in a society that fundamentally developed through income inequality makes it difficult to protect or “legislate” economic equality. Compounding this problem is the blurred line that exists in giving people equal economic opportunity and expecting equal results (the latter is difficult to achieve). The key finding in this narrative is the difficulty associated with differentiating economic rights from political rights. A classical example would be affirmative action for racial minorities in America (Dawson 111-114).
While most people agree that many years of discrimination disadvantaged most of them from making economic strides, at least as white people did, it is difficult to introduce a law that gives them special treatment to make them at par with white people. In fact, doing so would equate to pre-empting economic outcomes (Dawson 113-114). Furthermore, even if America managed to do so, how would it achieve its goals? These concerns make it difficult to introduce income equality as a constitutional provision.
The American Dream
The American dream has always attracted many people from all over the world to come to America. In the hope of having a better life and enjoying the fruits of equal opportunity, immigrants have come to America to seek a better life. While this hope remains alive, even today, many people doubt whether the American dream is what it used to be. For example, Lupia and McCubbins (373) say it is difficult for people from poor American families to move up the socioeconomic ladder and become middle class citizens. Similarly, it is difficult for middle class citizens to move up the economic ladder and become wealthy.
Recent media reports show that the American economy continues to grow, but skeptics do not believe that everybody is reaping the benefits of this progress (Sommeiller 8). In fact, statistics show that rich people reap the highest returns from this economic growth. For example, Sommeiller (4) says, between 1979 and 2009, the wealthiest Americans (1% of the population) claimed more than 50% of the total income growth in the country. Consequently, many people believe that the “American dream” does not work for everybody. The selective economic returns are prompting many of them to argue that only the rich get to live the American dream, while the poor do not have access to the same opportunity (Sommeiller 8).
The democratic ideals that America has used to withstand some of the most treacherous political and social divisions have also come under threat from income inequalities (Lupia & McCubbins 373). Indeed, while democracy promotes equality, income inequality disproves the same notion of the concept. Stated differently, democratic ideals give everybody a voice in influencing today’s governance and political systems. However, income inequality has created a power imbalance between the rich and the poor by giving more voice to the rich to dictate policies and systems that govern the poor (Hardin 1243).
This way, they undermine the democratic ideals that make up the American society in the first place. Consequently, the poor are at the mercy of the rich because they lack the resources to bargain for political power, or shape their economic destinies (Hardin 1243). For example, through the policy choices made by the rich, poor people have had a difficult time bargaining for better wages, even as they work hard to increase their productivity (Hardin 1243). In line with this trend, Sommeiller says, “the mismatch between reward and effort make a mockery of the American dream” (12).
Conclusion
Although income inequality may decline, current economic trends show that we may not realize this outcome soon. However, if more economic experts focus on seeking better solutions for meeting this goal, they would propose workable solutions to lower this gap. The above-mentioned rising income gaps between the rich and the poor have brought a new dilemma in the American society, which questions whether the U.S., which greatly values the ideas of equal opportunity to succeed, can sustain the same inequalities. Only two scenarios could emerge from this situation –
- Americans have to give up on the idea of the American dream;
- the government should introduce new policies that would lower income inequalities between the rich and the middle-class.
Nonetheless, based on the arguments for income inequality and those against it, future studies should investigate the extent that income inequalities affect economic growth because, currently, the debate is open.
Works Cited
Dawson, Michael. Not in our Lifetimes: The Future of Black Politics, Chicago, IL: University of Chicago Press, 2011. Print.
Hardin, Garett. “Tragedy of the Commons.” Science Direct 162.3859 (1968): 1243-48. Print.
Lupia, Arthur and McCubbins Mathew. The Democratic dilemma: Can Citizens Learn what they need to Know, New York, NY: Cambridge University Press, 1998. Print.
Monrone, James and Kerg Rogan. By the People, Oxford, UK: Oxford University Press, 2014. Print.
Sommeiller, Estelle. The Increasingly Unequal States of America. 2015. Web.