Causes Of Economic Inequality

Economic inequality commonly refers to the disparity of wealth or wages between different groups or within a society. More specifically, it refers to the extent to which income is distributed unevenly amongst a nation. In the US, the gap in income or assets between the richest and the remaining population has grown considerably throughout the past few decades. For instance, the top 1 percent now own more than 40 percent of US wealth. In comparison, the bottom 80 percent only own 7 percent of America’s wealth. The wealth gap has not merely raised extensive public awareness, but its severity has also entered public consciousness. In fact, Barack Obama, America’s previous president, described rising income inequality as the “defining challenge

In America during 1978, the average male worker earned $48,000. In contrast, the average member of the one percent earned $390,000, or eight times more. By 2010, male US worker’s wages from the middle-classes had declined to $33,000 whilst the 1 percent earned $1.1 million, or 33 times as much. As the wealthy experience this cumulative income, middle classes’ wages stagnate or weaken. Revenues and benefits go to the wealthy at the expense of everyone else. For instance, the middle class is progressively shrinking. According to White House’s Council of Economic Advisers, the percentage of people who are middle class has fallen from 50 percent to 42 percent. On the contrary, a 2012 report by the Congressional Research Service reveals that the wealthiest 10 percent of households went from controlling 67 percent of the country’s wealth in 1989 to almost 75 percent in 2010. Moreover, this uneven distribution of wealth has contributed enormously to increased poverty and deprivation in the US. In fact, 1 in 7 Americans today experience hunger and 16 million children live in poverty. Additionally, too great economic inequality prevents the economy from growing. In view of middle-class worker’s reduction or stagnation in salaries, they have less disposable income to spend. Thus, businesses suffer and must cut costs, which inevitably leads to even more reduced revenues for

The most affluent citizens have more influence and they also hold disproportionate political power. In other words, when income distributes unequally and is concentrated in the hands of a small number, political power often skews in favour of these wealthy groups. Owing to this, they can persuade politicians and lawmakers to implement policies that favour them, whether it’s done legally or in corrupt ways, whilst correspondingly hurting the rest of society. For instance, despite having a progressive tax system in America, in which tax rates are larger for high-income earners than it is for others with lower wages, the most prosperous people seem to pay less tax. Consequently, this leads to a reduced amount of tax revenues and less money able to be spent on education, health, transport etc. Recently, public universities have experienced a decrease in their state funding, leaving them no choice but to raise tuition fees. Given stagnant and declining salaries for middle class in the US, it becomes more difficult to afford these expenses. Nevertheless, education is still indispensable which is the reason why debt can be