What Is Income Inequality Likely To Slow Down Growth?

Inequality exists around us. One of the inequalities is the income received by a person or member of a family. This income includes wages, salaries, pensions, and interest derived from assets. Income inequality refers to the various income within a given population. This inequality is especially high in the United States.

Now more than in recent past is economic and wealth inequality a crucial issue in

Income inequality describes the extent to which income is distributed unevenly among residents of an area. High levels of inequality indicate that a small number of people receive most of the total income, and that most people receive only a small share of the total. There are many advantages and disadvantages associated with the inequitable distribution of income.

It is a commonly accepted that inequality is increasing throughout the globe, with startling statistics such as the recent Oxfam report indicating that the richest 85 people in the world own more wealth than the poorest 3.5 billion people(Oxfam Australia Media, 2014). Inequality is thought of as disparities or gaps, such as the distance between a low income and a high income household, or the ratio of their incomes (Divided We Stand, 2011). Domestic inequality refers to inequality within a country and

The issue of income inequality in the United States is complicated and does not have a definite answer. Income inequality can be measured in a few different ways. The first measurement for the income inequality in a country is to look at the percentages on households and group them into income categories, called distribution by income category. The second measurement for income inequality is called distribution by quintiles or fifths. This is when you divide the total number of people, households, families into five groups called quintiles to examine the percentage of total before tax income received by each quintile. Each quintile would then be ordered by income and households in the category.

From 1938-1969, in America was in a period called the great compression, a time where the difference between the richest and poorest Americans was very small and economic growth was explosive. Due to past and current economic policies and events, income inequality has exploded in America, which is why in 2015 America had the highest level of wealth inequality in the world at 80.56 gini[1] . In the future this inequality will slow down economic growth, increase debt for middle income Americans, make America less democratic, and reduce economic mobility. This problem, however, does have solutions and this paper will lay out some of the solutions and the effect they will have on the economy, but first I will explain the history of income inequality in the US.

First we must define what exactly income inequality really is and that is according to Definition of ‘Income Inequality’ (2015) said to be unequal income distributed to household or individual across the various participants in an economy. Income inequality is often presented as the percentage of income to a percentage of population. For example,

Presently the United State 's income gap between the middle class and wealthy is undoubtedly significant. Some say that income inequality is

Income and wealth inequality refers to the degree to which income is unevenly distributed among people in an economy. The share of total income received by different groups measures inequality, this visually represented in the Lorenz curve. The line of perfect equality bisects the graph with the percentage of income

In any given population, there is a difference between what people within the population earn. The uneven distribution of income in any given population is income inequality. In order for there to be income, there has to be several sources of income. These sources of income may be combinational or independent per person receiving the income. Income may result from wages, rent, bank account interests, salaries or even profits made in business transactions ( Stiglitz, 2012).

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).

In the article, what can be done about inequality? The author Atkinson shows many alternatives to reduce wealth inequality, including changes in tax, employment, pay, and wealth policies. However, the author, states that that solution is in the hands of employers, investors. Savers, workers and consumers. The author argues that economic inequality is receiving a lot attention in social media and its attraction from world leaders given their opinion, but they don’t say how they’re going to achieve it. The author states that if people want to reduce income inequality are steps to follow, but those steps are costly and are not easy. To demonstrate that there is a solution to wealth distribution, he displays alternatives such as make up for household’s

Wealthier individuals often have more power than the poor and are sometimes even able to maintain their wealth at the cost of the poor. Inequality of income is often one of the most significant reasons for the disparity within classes socially and one of the most important reasons that poverty is often intergenerational. Particularly in this tumultuous political time of divisiveness, people who are willing and able to make changes to the status quo in meaningful ways are of the utmost importance. Closing the gap in wealth is one of the most essential ways to ensure that inequality is addressed and that the other social issues surrounding this gap will be lessened and lessened until it hopefully eventually disappears. Change-makers are more important than ever and those groups and nations as well as individuals with power that are willing to be honest with themselves and

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

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.