Income Inequality Vs Wealth Inequality Analysis

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 other words, America has a widening gap between its wealthy and poor. As the rich get richer and the poor get poorer, there is a problem emerging: the disappearance of the middle class. Low-wage workers continue to fall behind those who make higher wages, and this only widens the gap between the two. There has been an economic boom in the United States, which has made the country more prosperous than it has ever been. That prosperity does not reach all people; it seems to only favor the rich. Rising economic segregation has taken away many opportunities for the poor to rise in America today. The poor may find that the economic boom has increased their income; however, as their income increase so does the prices they must for their living expenses (Dreier, Mollenkopf, & Swanstrom 19).

In William Domhoff’s article, Wealth, Income, and Power, he examines wealth distribution in the United States, specifically financial inequality. He concludes that the wealthiest 10% of the United States effectively owns America, and that this is due in large part to an increase in unequal distribution of wealth between 1983 and 2004. Domhoff also states that the unequal wealth distribution is due in large part to tax cuts for the wealthy and the defeat of labor unions. Most of Domhoff’s information is accurate and includes strong, valid arguments and statements. However, there is room for improvement when identifying the subject of what is causing the inequality.

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.

Wealth inequality in the United States has grown tremendously since 1970. The United States continuously reveals higher rates of inequality as a result of perpetual support for free market capitalism. The high rates of wealth inequality cause the growing financial crisis to persist, lower socio-economic mobility, increase national poverty, and have adverse effects on health and well being.

The gap between the upper class and the lower class is growing; the rich are getting richer and the poor are getting poorer. Instead of helping the lower class, the upper class is spending their money on fancy houses and material objects. For example, in the outskirts of cities, the rich business owners are building large mansions to live in. On the other hand, the lower class live in tiny tenements in the heart of the city. Many are unemployed and starving. In addition, between 1865 and 1900 only a small percent of Americans grew wealthy showing that wealth is only being passed through families not gained. However this growing gap between rich and poor has allowed the growth of the middle class. This middle class made up of doctors, lawyers and other will help the will hopefully help lessen the gap between

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

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

The final three decaded of the 19th century spanned the Gilded Age; one of the most contentious and volatile periods in American history. It has been portrayed as a period of greed and corruption, of brutal industrial competition and harsh exploitation of labour. Sounds familiar? Wealth inequality refers to the one sided distribution of financdial assets among U.S. residents.

Wealth inequality is a controversial topic because money distribution in America doesn’t ‘seem right. The upper class possess most of the wealth in America and the bottom don’t nearly get as much.

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.

This “middle-class nation” is struggling to support all those who live in its borders and the misconceptions about wealth are vastly overrated. Furthermore, the idea of wealth and stability is incorrect, and there is a very sharp contrast between the rich and poor in the country. As the richest twenty percent of American hold ninety percent of the total household of the total household wealth in the country, those at the bottom have managed very poorly and suffer to get through the days.

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

Over the past few decades, the “American Dream” vision has been quickly vanishing as a result of the increasing troubles and weakening of the middle class. It has lost the view of being the most successful and wealthy middle class in the world, while the middle classes in other countries are excelling in earning higher middle and lower class incomes. The issue of the declining wealth of the middle class explains a huge problem in the United States’ future prosperity and well being for the citizens and the country. There are many issues that affect the success of the middle and lower classes, such as structural differences in the economy, culture, and government. The gap between the middle and high classes is increasing specifically. The United States has the image of giving people life and prosperity, but inequality is increasing significantly due to issues in education, decrease in taxation among the upper class, and decrease of middle class power in the democracy, while other ideas and mechanisms can be take from other nations.