income inequality in america

Income Inequality In America: the Facts

Income inequality has been one of the major issues in the USA for a long time, with a large percentage of wealth going to a small percentage of the population. Income inequality is caused by numerous reasons, including governmental policies, historical racial segregation, outsourcing, a stagnating minimum wage, technological changes, globalization, as well as the waning power of labor unions.

This is the gap between the money earned by the richest people in an economy when compared to the poorest. Keep on reading to learn more about income inequality in the USA and its causes.

The Definition of Income Inequality

Income inequality comprises investment earnings, wages, rent, and sales of real estate. Speaking economically, this is the disparity in how profit is divided between groups, people, social classes, populations, and countries.

In other words, income inequality is defined by how we realize socioeconomic statuses, and how we determine the working class, the middle class, and the upper class. Other forms of inequality such as political power, wealth, and social status influence income inequality.

Many people will consider income as one of the most significant factors that define the quality of their lives. Even today, thousands of people live from paycheck to paycheck in the USA and often rely on guaranteed approval credit cards with $1,000 limits for bad credit no deposit when they urgently require supplemental funds for their needs.

Income allows consumers to gain access to education, health care, housing, etc. We all strive for financial stability though many individuals have to take out some lending options once in a while to remain financially afloat. It is usually caused by income inequality.

This term differs by social factors including gender identity, sexual identity, race, ethnicity, and age. As a result, it leads to a wider gap between the working and the upper class.

Why Income Inequality Is an Issue

Income inequality is a major issue in the USA today as it puts the power in the hands of the upper class. As a result, there is almost no economic and social mobility for big portions of the US population. Income inequality may lead to higher living expenses, mental issues, increased financial disruptions, social unrest, and rises in crime. Hence, middle and lower class consumers won’t benefit from it.

Income Inequality in the USA

The top 20% of the US population earned 52.2% of American income in 2020. The average household income lowered rapidly to $67,521 for the first time since 2011. More people are living paycheck to paycheck these days. The lowest earner’s median household income was $14,589 while the bottom 20% earned 3% of the nation’s income.

The majority of low-income employees get no sick days, health insurance, and pension plans from their recruiters, according to National Health Statistics Reports. They can’t save enough for their retirement and often have no chance to take off work when they get ill. It creates health care inequality as well which boosts the expenses for medical care.

Those who don’t have enough financial means to obtain preventive health care will typically appear in the hospital emergency room. About 15.4% of uninsured consumers who visited the RT in 2014 claimed they chose this option as they had nowhere to turn.

How to Measure Income Inequality

Income inequality is measured by the U.S. Census Bureau using household income. Besides, this term can be also measured by the Gini index, which is the share of aggregate household income held by every quintile and by estimates of the ratios of income percentiles.

These percentiles comprise the mean logarithmic deviation of income (MLD), the Theil Index, as well as the Atkinson measure. The Gini index ranges from zero to one, where zero means a perfectly equal distribution of income into a single number and one means just one individual has all the money.

Causes of Income Inequality

The main reasons for income inequality are technological changes, outsourcing, as well as deregulation. Many corporations put profits ahead of their workers. For instance, Indian and Chinese organizations pay their workers much less than U.S. companies.

Furthermore, many corporations and organizations have outsourced their manufacturing and high-tech jobs abroad. This is a common cause of income inequality in the USA. Our country has already lost about 36 percent of factory positions since 1980.

These jobs used to be higher-paid. Nowadays, there is a boost in service positions but they are much lower paid. Another reason for income inequality is technological changes.

Many employees in factory jobs were replaced due to these changes. Economic mobility can be improved by such a powerful factor as education. It is estimated that American consumers who have college degrees make 84% more compared to people with just high school degrees. Speaking of deregulation, it means less stringent investigations into labor disputes.

Deregulation is beneficial for businesses more than employees. Many organizations went public during the 1990s. It was done to gain more funds and later to invest in growth. Now, managers have to please stockholders and produce larger profits. Wage is the biggest budget item for many organizations. Fewer full-time workers are engaged in the work process due to re-engineering. Moreover, more temporary and contract workers are hired.

People from other countries and immigrants land more low-paid service jobs. Although the Federal Reserve has placed lower interest rates recently, housing prices haven’t become more affordable. Instead, they began to increase dramatically over the past few years while the salaries remain flat.

The Bottom Line

As we can see from the history of income inequality in the USA, governments can tilt the balance of economic compensation by implementing policies that put racial and ethnic groups at onerous economic downsides that keep on having a continuous impact for several generations, on the basis of social and political climates of the time.

White citizens and residents have been favored for the past 200 years while higher levels of stress and crime are often associated with higher income inequality. The USA should exercise effective policies to get through income disparities and overcome income inequality.

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