Economic Inequality And Its Effects On Economic Growth

In today’s capitalist economy, where economic transactions and business in general is centered on self-interest, there is a natural tendency for some people to make more than others. That is the basis for the “American Dream,” where people, if they worked hard, could make money proportional to their effort. However, what happens when this natural occurrence grows disproportional in its allocation of wealth within a society? The resulting issue becomes income inequality. Where a small portion of the population, own the majority of the wealth and the majority of the population own only a fraction of what the rich own. This prominent issue has always been the subject of social tension

Global discourse around the issue of growing inequality and specifically inequality of opportunity has come to the fore in recent years driven by violent public action witnessed in the spring of 2011. A little southern town in Tunisia known as Sidi Bouzoid in December 2010 took global centre stage in the push for economic emancipation. Mohamed Bouazizi, a fruit vendor vented his frustration with the local corrupt municipality by setting himself ablaze which inadvertently sparked a series of protests across the Arab world. Enter the ‘Arab Spring’ led by disenfranchised youth. Researchers in attempts to diagnose the inspiration for the ensuing revolutions hypothesised stark inequality between economic and political elites and the larger population, as the fuel behind the flame.

There is no doubt that wealth inequality in America has been escalating quickly; the portion of total income earned by the top one percent has doubled since the beginning of the 1970’s. The wealthy are the main beneficiaries

Americans today live in a distinctly unequal society. Inequality is now wider than it used to be in the last century, and the division in income, wages, and wealth are broader than they are in other developed economies of the world. Wealth inequality is the imbalance of wealth or income within a society, and it is one of the most vital economic challenge the US is facing today because the distribution of wealth is more dispersed, making the inequality in wealth distribution at its highest. While the matter has been discussed for many years, the actual income disparity in the U.S. has heightened and is now verging on an extreme gap that portends to impede long-term economic growth. The huge gap between the wealthy and poor is squeezing the U.S. economy, the wealth gap threatens economic growth by diminishing social mobility and producing a less-educated workforce who are not able to compete in the global economy. unrestrained level of income inequality causes political pressures, it discourages trade, investment, and hiring. The present level of income inequality in the U.S. is shrinking GDP growth, and the world's largest economy is struggling to recover from the Great Recession.

Wealth inequality is already shaping American politics and society, and has the dangerous potential to be the defining problem of the upcoming generation. A sizable cause for wealth inequality in America is a dire lack of

Income inequality has been a major concern around the world, and it mainly links to how economic metrics are distributed among individuals in a country. Economists generally categorise these metrics in wealth, income and consumption. Wilkinson and Picket (2009) showed in their studies that inequality has drawbacks that lead to social problems. This is because income inequality and wealth concentration can hinder or delay long term growth. In 2011, International Monetary Fund economists showed that less income inequality increased the duration of countries’ economic growth spells more than free trade, low government corruption, foreign investment or low foreign debt (Berg and Ostry, 2011).

High income inequality prevents an economy from growing, so the current status of the wealth gap in the U.S. is dangerous to the future of the U.S. economy. In fact, the average income of the top 10% of the United States population is roughly nine times greater than the average income of the poorest 10% of the population (OECD). This widening wealth gap is a problem of extreme importance and failure to recognize it may lead to social problems such as a rise in crime and overall social unrest. A continuing rise in this wealth gap affects all U.S. citizens as the bottom 99% may lose opportunities in education and be exposed to more crime, and the top 1% may lose consumers as no one will be able to afford their products. Furthermore, due to this rising gap, ordinary children of the masses, who are from the bottom 40%, are being denied to educational opportunities because they cost more money (Ingraham). Regardless if a child is born into a wealthy or poor family, they are still born with the same attributes; however, it is income inequality that creates inequality in educational opportunities for children, which threatens the overall educational status quo of the nation. A major wealth gap in any society is strongly associated with significant problems such as greater poverty levels, more crime, and even poor conditions of health (Partridge and Weinstein).

Economic inequality has been steadily growing over the past decades. According to this article, “In more recent years, accumulation of wealth by economic elites has received greater attention. Not only are the rich becoming richer, but the disparities are growing the fastest at the top. In the United States, for example, growth in wealth has occurred mainly at the very top of the scale.” (Hansen 457). This means that wealth begins to expand and business owners earn more, however pay more but not a lot more then previously. This would be a good thing, but not everyone in America is a business owner. In fact, the majority of citizens slightly benefited from the growing economy. While most view the economy as unequal, the upper class and even U.S representatives consider it fair and justified (Kraus and Callaghan

Today, America is considered one of the most developed and advanced country in the world. On top of everything, this promised country is well-known for its strong and effective economic free-market system. The foundation of the United States is based on the belief of freedom and equality, which is enjoyed and practiced by most of people in the “Country of Liberty.” Unfortunately, the idea of equality does not apply to every citizen of the U.S. In fact, the problem of inequality in America has remained a controversial issue for centuries. Specifically, today, the gap of wealth between people in the United States is dramatically increasing. Emmanuel Saez, an economics professor at UC-Berkeley states that: “Wealth inequality in exploding, constituting a direct threat to the cherished American ideals of meritocracy and opportunity.” Wealth inequality is undoubtedly the biggest problem the American society is facing.

No country in this globe can escape from wealth inequality. Never and ever. Even, America – The land of opportunity and the first economy of the world. While the nation is striving towards achieving its dream, it is faced with the problem of wealth gap among the low, middle, and upper classes of the society. Wealth inequality is a phenomenon or a social event of the difference in money and other assets which individuals can accumulate. For some people, no more land of opportunity and the existing wealth gap is a result of unequal opportunity. However, I and others argue the nation is still a land of opportunity, but with some challenges to overcome. Furthermore, I and some firmly believe that the wealthiest people at the top are the achievers

It can be argued that the trend for global inequality is that “The rich get richer, the poor get poorer.”

The wealth gap between the rich and the poor continues to grow in America as it has in recent decades. Wealth distribution in America has not been this unequal since 1928, the year before the Great Depression started. The richest four hundred people in America have more money than the one hundred fifty million poorest Americans combined. The wealth gap needs to shrink due to the negative repercussions of wealth inequality. Wealth inequality leads to inequality in other aspects of life. Uneven distribution of wealth stunts economic growth as well as limits socio economic mobility. It also leads to a shorter lifespan for the less wealthy.

Capitalism has been the central force behind the growth of the United States’ progressive economy. Within such advanced economic system the chances of economic disparity are significantly high. In fact, over the past three decades there has being a steady increase in unequal wealth distribution among the economic classes. To sustain the current unequal wealth distribution among the classes of the American population, there are numerous factors that influence and shape this trend. For some members of the population it is alarmingly disturbing to know that recent statistics have shown that, “In the US [alone] the wealthiest 1% of its population owns more than the bottom 95 %” (Gutman). As for the difference in economic wealth, it resulted

According to the OECD, the term inequality in the opposite of equity can be defined as evenness

Income redistribution refers to the concept of transferring income from the wealthy individuals to the less wealthy individuals through social mechanisms such as monetary policies, charity, welfare, land reforms, and taxation among others. Income redistribution affects the entire economy rather than selected groups of individuals. The concept of income redistribution emanates from the existence of income inequalities within an economy. Income inequality depicts a gap between the highest and the lowest income earners in an economy (Tullock 13). Income inequality is sometimes considered appropriate in societies since it acts as an incentive in free market economies, whereby in the absence of inequality, elements of economic stagnation and lack of enterprise would emerge. Conversely, income inequality is criticized on the basis of introducing contributing towards the development of key problems in the society, including progression of poverty levels. This paper seeks to explore the concept of income redistribution and its key pros and cons.