The Effect of Income Inequality on Economic Growth

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.

Technology was booming and created opportunities for both men and women and aided the everyday household with what we call today, necessities. “In 1912, only 16 percent of American households had electricity; by the mid-20s, almost two-thirds did. Overnight, the electric vacuum cleaner, the electric refrigerator and freezer, and the automatic washing machine became staples in middle-class homes”

The end is approaching if I may say. Many dangers have approached earth and have surrounded our small planet. Yet we all wonder what the main or the most dangerous to human existence is. On May 28, 2008, Robert J. Samuelson, a columnist for The Washington Post, published the article "Rx for Global Poverty". Robert J. Samuelson claims that the greatest moral challenge the world is facing nowadays is global poverty. He stated that Poverty has left about 2.5 billion people, which makes up more than one-third of the earth’s population, in 2004 to survive on an estimated $2 a day. However, with time, statistics show that many countries have been able to eradicate poverty and have their economies flourish (Samuelson, 2008). According to Samuelson,

Income Inequality is a major problem that has been going on in America for decades. Many people feel that it barely exists today, but those people are very uneducated and don’t really care about the huge problem in front of them the many people that feel that way are highly uneducated, and seem to not really care about which has been gradually increasing instead of decreasing. Unfortunately, there’s not much that can be done, only of course if the poor class of people decide to actually educate themselves and get a higher education. One says poor class, simply because that’s how they’re classified. There are five types of levels that Americans are classified as, and they are: Upper Class, Upper Middle Class, Middle Class, Working Class, Poor. The highest percentage of Americans fall in the Poor department, and it has been that way for decades, and will continue to be that way for decades to come.

Poverty is an issue that has affected society since civilization was first created. Even with a globalized economy and economic opportunity prevalent nearly everywhere, there is still a vast majority of people who live in financial strain. According to recent information obtained by the World Bank, “10.7% of the world’s population live on less than US $1.90 a day”(World Bank 2013). In the United States considered the wealthiest nation on Earth, the poverty rate is 12.7% which is 40.6 million people(US Census Bureau 2016). Though some people are in poverty because of their own choices, poverty is a result of structural institutional practices in place.

Income inequality is increasingly becoming a significant concern for many countries around the world. The income difference between the highly-educated, skilled, wealthy class and the poor, low to mid-skilled workers is growing larger and larger. In fact, the incomes of the rich are increasing significantly, while the low skilled workers’ incomes have been declining (The Economist, “Wealth Without Workers”). According to The Economist, real median wages have been decreasing since 2000 in half of the member countries in the Organisation for Economic Co-operation and Development (OECD). In the United States, there was a 4% increase from 1980 to 2012 in the share of national income that was distributed to the top 0.01% (The Economist, “True Progressivism”). Canada is facing a similar problem of rising inequality.

After recently suffering through a recession, America began to prosper economically. During the 1920’s the nation’s manufacturing output rose by more than sixty percent (Brinkley, 634). There were many technology advances during this time period. The automobile became one of the most important industries in the nation (Carr-Wilcox, March 4, 2013). Auto manufactures had to purchase steel, rubber, gasoline, oil, and tools, which in turn gave rise to these industries. The radio became a popular technology. By the end of the 1920’s almost every family in America had a radio in their household. Even the bases of the earliest computers were being made during the 1920’s. Technology had a huge impact on the communication of people in the twenties.

Over three billion people live on less than two dollars and fifty cents a day. That's almost half the population of mankind. But poverty is not just about not having enough money, it's about not being able to obtain, basic human needs. Around the world people lack such necessities, like clean water, food, suitable clothing, etc. It’s because a person is not well suited to today’s society, it creates a large gap between the fortunate and those who struggle to survive.

The 1920s were a time of great change in all countries, particularly in the United States of America. America however also saw mass unrest, particularly economical, political and social unrest. All of these issues were influential on the American pubic. The 1920’s began with a massive political change – women were given the right to vote, by the 19th Amendment of the Constitution.

The availability of utilities such as electricity in the average household is a key point, when considering how society converted to consumer basis in the 1920’s. It opened a new opportunities for devices which improved on the perceived quality of life. It also opened the gates for new products to be purchased in every household. These types of goods decreased time

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).

resources, income, and other factors between different sectors in the society. Inequality can be defined

Swanson’s article highlights the level of wealth to poverty in surprising numbers of which people are extremely unaware. To measure people’s wealth one has to take into account their savings and property minus the debt. The world's top percentile is wealthier than the rest of the globe combined, according to Credit Suisse. To be in the top 10 percent of wealth in the world, one needs to only have $68,800 in wealth. According to the Federal Reserve, the median American family had $81,000 in net worth in 2013 according to the Federal Reserve. These families are in the top 10 percent of the world and yet there is still 71% of the globe's population with less than $10,000 in wealth. This is only 3% of the global wealth. Also, in 2015 according

The problem of poverty has always plagued the world, including developed countries, such as America. It is one of the main reasons that less developed countries have difficulty developing at the pace of other countries. Many different actions can cause poverty. Most people have different opinions on why poverty still exists. “Nearly equal portions of the public in advanced, emerging, and developing countries, cite the gap between the rich and the poor as a very big problem. And notably, it is the leading economic concern in the eyes of people in major economies such as China and Germany, at 42 and 39 percent, respectively, according to the new Pew Research survey. A global median of 29 percent say their government’s actions are to blame for inequality, making it the leading cause cited. People in advanced economies, in particular, believe that their governments are responsible for the rich getting richer and equally culpable for the poor becoming relatively poorer. A median of 32 percent in those nations blame government, three times the percentage that cite the failings of their educational system and double the share who blame their tax system” (Stokes). Some people that are wealthy are also greedy. Although they control a large amount of wealth, they are unwilling to share it. Although it should not be the responsibility of wealthy people to support people in poverty, it would be helpful to the advancement of society. Another contributing reason that poverty exists is

Unfortunately, it was estimated that roughly 1.2 billion people in 1993 lived in extreme or absolute poverty, that which Robert McNamara regards “‘a condition of life so characterized by malnutrition, illiteracy, disease, squalid surroundings, high infant mortality and low life expectancy as to be beneath any reasonable standard of human dignity’” (Singer 219, 220). These estimates can be projected at nearly 2 billion today. A large majority of the people living in absolute poverty resides in underdeveloped countries. Among the nearly 4.4 billion people in these countries, “3/5 lives in societies lacking basic sanitation; 1/3 go without safe drinking water; 1/4 lack adequate housing; 1/5 are undernourished, and 1.3 billion live on less than $1 a day” (Speth 1).