On December 4, 2013, President Barack Obama addressed the nation, focusing on income inequality and economic mobility. President Obama claimed that “The combined trends of the increased inequality and decreasing mobility pose a fundamental threat to the American Dream, our way of life, and what we stand for around the globe (The White House, 2013b).” President Obama also stated that “this is the defining challenge of our time (The White House, 2013).” The “challenge” he was referring to the ability of the economy to work for all working Americans. Currently, with the income distribution inequality facing the United States, one could argue that the economy is not functioning for everyone. President Obama feels that in order to decrease the income inequality and improve mobility, the government must step in and put policies in place. Without government intervention and implementing policies, including a raise in minimum wage, the United States will not be able to achieve and acceptable distribution of income or an acceptable incentive for productivity. The current distribution of income in the United States is a result of the free market failing. According to the United States Census Bureau, the top fifth of the income earners took home 51% of the national income while the bottom fifth took home a mere 3.2% (United States of Commerce, 2014). Income of the top fifth has been slowly increasing through the past ten years and the bottom fifth has been slowly decreasing.
In the United States, high standard of living is not equally shared with in the Americans. The 1970s and 1990s was period where economic inequality began to grow. Emmanuel Saez, an economics professor at UC Berkeley has been doing a research for the U.S. income inequality. He states that there has been an increase since the 1970s, and has reached levels that have not been seen since 1928. “In 1928, the top 1% of families received 23.9% of all pretax income, while the bottom 90% received 50.7%. But the Depression and World War II dramatically reshaped the nation’s income distribution, by 1944 the top 1%’s share was down to 11.3%, while the bottom 90% were receiving 67.5%, levels that would remain more or less constant for the next three decades. But starting in the mid- to late 1970s, the uppermost percent income share began rising dramatically, while that of the bottom 90% started to fall.”(DeSilver) Ever since then, economic inequality continues to increase, especially in the last three decades.
In a research of Harvard professor 5000 people in America have opinion in how they think about the actual distribution of wealth in the U.S. and the 92 percent choose the ideal would be 20 percent and 20 percent the middle class. However, the reality is very far from it. “The poorest are not even registered, they are on the package change and the middle class is barely distinguished from the poor, even the rich between the 10 % and 20 % are worst off, only the top 10 % are better off. Only the one percent gets ten time higher and 40 % all the nation wealth. The bottom 80 % 8 out 10 people only has 7 % between them.1 % makes a quarter of the national income today”(you tube, 2015). All of this data reflex one of the truly perspectives in economy of the U.S. Not only people with low wages are the most affected, but also those who have good jobs and
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.
Furthermore, when analyzing the different classes, and the distributions of wealth and income in the United Sates; for instance, the upper, middle, and lower classes – it is an astronomical amount of wealth that the top 1 percent acquire. It is also noted by Johnson & Rhodes (2015), “that income and wage inequality have risen sharply over the last thirty years” (pg. 228). Equally important to this, is how the average change in income is divided in Americas quintiles and the widening gaps. For example, in Table 5.2, while the lowest fifth quintile increased from $11,128 to $11,361 – a difference of $233.00 from years 2006 to 2012; the highest quintile increased from $289,446 to $319,918 – an exponential increase of $30,472 (pg. 229). With income inequalities at this rate, it is difficult for the majority of the United States to experience upward social mobility. Pursuing this further, in a line stated by Johnson and Rhodes (2015), “The wealthiest Americans can live on the dividends from their investments without having to touch the principle or work for a salary” (pg. 230). From this, it is visible to see how society has compartmentalized different levels of functions to keep a so called balance for the greater
Today in America, income and wealth inequality has continued to grow at an unsettling pace. The rich continue to get richer, while the number of people categorized as lower class grows exponentially. As Joseph Stiglitz has explained, many theories that are seen as strongly Republican, such as the trickle-down effect, has caused the rich to take money from the poor, and as a result the lower class grows and the middle class disintegrates. The top 1 percent of America’s households currently holds 30 percent of America’s economy, which is much more than other first-world countries and helps to emphasize the extremity of inequality currently in America today. This increased inequality has in turn caused America to become a much more divided society; those born in poverty typically stay in poverty, with little to no chance of self-improvement due to a lack of education provided in their areas. In contrast, those that are born wealthy typically go to better schools, have better health care, and are all but spoon fed information on how to remain wealthy. These two sides of society almost never cross, and this causes the country to be more divided than ever. In order to limit this inequality, drastic changes must be made, such as large corporations paying their fair share of taxes and giving back to the lower class, and minimum wage should be raised. If everyone in America works together, we can raise social mobility and re-unite what has become an increasingly divided country.
Money has become the lethal weapon that controls everything in society, it is an essential need in order to survive. Without money one simply cannot provide for their basic needs such as food, housing, clothing etc. As the value of money increases in the country it creates a heavy burden on the lower class. In terms of wealth in the United States we have the lower class (bottom twenty percent), the middle class (second twenty percent, middle twenty percent), and the upper class (fourth twenty percent, top twenty percent). As time passes by, the gap between the top twenty percent and the bottom twenty percent rapidly increases, leaving a dramatic gap between the two. The question that comes to thought is, is the distribution of wealth in the
The following memorandum is a direct response to Robert Reich’s book Aftershock: The Next Economy and America’s Future (2013). It includes an overview of Reich’s diagnosis of the economic issues facing America, as well as relevant analysis for consideration by the President and Congress. The following text considers a potential prescription for the issue of income equality and a prediction regarding the potential action or inaction of the United States government on these issues.
In Robert Reich documentary “Inequality for All” he makes a compelling discussion about the serious crises that the United States faces due the widening economic gap. He looks to raise awareness of the U.S. economic gap between the rich and poor. According to Reich the widening divide in America is real and growing. Income levels at the middle and labor class is stagnant and are at it’s lowest levels compared to upper class incomes since the beginning of WWII and is growing wider each year. Reich suggests that the economy runs more smoothly when the middle class has jobs with fair wages, when unions are strong, and when middle class workers have some extra money to spend if possible when the government uses the tax policy properly and when it raises the minimum wage regularly to control the income gap between labor and management. In other words Reich argues that economically healthy middle and labor class equality is the foundation of a thriving economy and is necessary to maintaining a sound national infrastructure and educational system within
The highest earning fifth of U.S. families earned 59.1% of all income, while the richest earned 88.9% of all wealth. A big gap between the rich and poor is often associated with low social mobility, which contradicts the American ideal of equal opportunity. Levels of income inequality are higher than they have been in almost a century, the top one percent has a share of the national income of over 20 percent (Wilhelm). There are a variety of factors that influence income inequality, a few of which will be discussed in this paper. Rising income inequality is caused by differences in life expectancy, rapidly increases in the incomes of the top 5 percent, social trends, and shifts in the global economy.
Also income is less concentrated than wealth. Also the Federal Reserve’s Survey of Consumer Finances (SCF) is the main source to obtain information related the allocation of wealth for household. The SCF income distribution received approximately a third of all income in 2013 data also shows that the top 3 percent of the, while the top 3 percent of the wealth distribution held 54 percent of all wealth (Stone, et al). Similarly, the top 10 percent of the income distribution received a little less than half of all income, while the top 10 percent of the wealth distribution held three-quarters of all wealth. In fact, the average wealth has amplified over the past 50 years, but it has not developed equally for all groups
Professor of ecology and evolution, Peter Turchin, describes the condition of the U.S. with a few statistics, “Today, the top one per cent of incomes in the United States accounts for one fifth of US earnings. The top one per cent of fortunes holds two-fifths of the total wealth. Just one rich family, the six heirs of the brothers Sam and James Walton, founders of Walmart, are worth more than the bottom 40 per cent of the American population combined.” (Cite) Turchin also analyzes economic inequality within the United States over the past 200 years. Within the time frame of the 1800s to the 1920s, economic inequality “increased more than a hundredfold.” Then from this point until the 1980s there was a period known as the “Great Compression” where economic equality grew. Over the past 40 years the trend has turned back towards inequality, and we find ourselves reentering an elitist, discriminatory system. Using historical economic patterns, the U.S. appears to have entered a new era of stagnation for economic equality.
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
Income inequality has affected American citizens ever since the American Dream came to existence. The American Dream is centered around the concept of working hard and earning enough money to support a family, own a home, send children to college, and invest for retirement. Economic gains in income are one of the only possible ways to achieve enough wealth to fulfill the dream. Unfortunately, many people cannot achieve this dream due to low income. Income inequality refers to the uneven distribution of income and wealth between the social classes of American citizens. The United States has often experienced a rise in inequality as the rich become richer and the poor become poorer, increasing the unstable gap between the two classes. The
Every American dreams of finding a job that pays well enough so that they may comfortably take care of their loved ones and themselves for years to come. Most Americans hope to find some way to make a living that they enjoy, something that they view as productive. Unfortunately, many do not have this luxury. In our society, a good portion of the population is forced to hold the base of our country in place while hardly being redeemed for their time and effort, and thus the problem of income inequality. Numbers of these people live from paycheck to paycheck, barely getting by, not because they manage their money poorly, but because the value of their time at work is negligible.
What makes these numbers seem so dreadful is the fact that the rich get richer and the poor get poorer. In the United States, it’s estimated that 20% of the population holds 80% of the wealth. We can break these figures down further, and note that the bottom 40% of all households have only 1% of all the