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The effects of income inequality essay
The effects of income inequality essay
The effects of income inequality essay
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Income inequality has become a common subject over the past year. Many people say that the wealth that the top 1% has is not fair. I am not concerned about fair or unfair, frankly many of these people have earned the money they have. That being said, what I am interested in is just how the economy is affected by the wealth of the 1%, or the disparity between them and the working-class person. Far too often this issue is brought up and normally shot down, or pushed to the side. I believe that it is their approach that is causing this. If they would approach the issue at hand by stating factual evidence of why the inequality is harmful to the economy instead of crying about how unfair it is, they would drastically increase the quantity of listeners. …show more content…
Human capital is the experience, skills, and knowledge that people have. It is looked at like a person’s cost or value to a company or country. As income inequality increases, so do education opportunities for the poor. When they cannot afford to send a child to college or trade school because of tuition and fees it means they will have no value as anything other than a menial worker. It will hinder the growth of human capital, meaning, there will be a lower level of specialization, highly skilled, or knowledgeable workers. When the level of human capital is lower it can’t reach a level of which is optimal for the growth of the economy. Also, it will lead to higher levels of unemployment and other social problems. Examples being higher rates of crime or rioting. People feel like the only way for them to make it in the “unfair” world is to take from others. Thus, becoming unproductive members of society and keeping human capital low. However, the poor are not the only ones affecting human capital. The rich are doing the same. Inherited wealth is a big problem as well. When someone inherits wealth, they are given an advantage. This “unfair” advantage can also lead to them becoming unproductive members of society. They can become lazy, and lose the drive and desire to get an education or gainful employment. They can simple coast off dividends, while never making an attempt of their own …show more content…
They will speak very highly of “trickle-down economics” a popular form of which was “Reaganomics”. Essentially what is believed is that with large tax cuts and looser regulations, typically affecting businesses, dividends and people earning high incomes. These people are believed to be where real growth comes from. The freeing of some of their money allows them to purchase even more stock or companies. The owners will then push more money into these companies increasing operations. The increase in operations leads to the need to hire more workers. The new workers then use their new wages for goods and services. This increases demand and will drive economic growth. Truly an excellent theory. In theory, it appears to be the end all. It is not. Upon further investigation, you will see that while Reagan did successfully end the 1980 recession, which saw not only double digit inflation but also double digit unemployment. However, this is not the only thing that came out of Reganomics. We also had the privilege of seeing the Federal Debt triple in only 8
People from lower classes try to achieve success but tend to struggle depending upon their foundation. The problem that people don’t want see is that we all want to become successful, and have the capability to do so but are just restricted by the lack of income.
Reaganomics beat stagflation by boosting the stagnant economy, and by reducing inflation. Altogether, President Reagan’s policies were very successful: he created 20 million new jobs, dropped inflation from 13.5 percent to 4.1 percent, dropped unemployment from 7.6 to 5.5 percent, and increased real gross national product by 26 percent (Source 5). Future presidents should keep Reaganomics in mind when writing their own economic policies.
While the bottom 80% is making no more than $118,000 a year, which is the 80th percentile, and have a median annual income of $48,000. The 1% makes up of around 750,000 of the 150 million families in the United States. Therefor the one percent ends up taking of 25% of all income generated by the United States economy. That is an increase of three times since the Ronald Reagan Era when the one percent only received 8% of the total income in 1979. The last time the one percent owned this much of the income total was in 1928, which was right around the time of the great
Wilhelm, Heather “The Great Income Inequality Sham” Real Clear Politics. May 2013. Web. 29 Apr 2014.
A plethora of research studies exist on the topic of wealth inequality in America. There is no question that the top one percent of earners consume a large portion of wealth in this country while the other 90 percent of earners share the left-overs. Some of the related questions that I found during the course of my research are 1) Why are wealth and income distributions so vastly disproportionate? 2) Can America bridge the wealth gap? 3) If so, how? 4) Has the wealth gap increased over time? 5) Are there public policies that influence wealth inequality? And, 6) Is America’s middle-class growing poor? Those are just a few of the many questions that circulate the discussion on wealth inequality in America. However, the two
In the United States there are four social classes : the upper class, the middle class, the working class, and the lower class. Of these four classes the most inequality exists between the upper class and the lower class. This inequality can be seen in the incomes that the two classes earn. During the period 1979 through the present , the growth in income has disproportionately grown.The bottom sixty percent of the US population actually saw their real income decrease in 1990 dollars. The next 20% saw medium gains. The top twenty percent saw their income increase 18%. The wealthiest one percent saw their incomes rise drastically over 80%. As reported in the 1997 Center on Budget's analysis , the wealthiest one percent of Americans ( 2.6 million people) received as much after-tax income in 1994 as the bottom 35 percent of the population combined (88 million people). But in 1977 the bottom 35 percent had about twice as much after tax income as the top one percent. These statistics further show the disproportional income growth among the social classes. The gr...
Krugman points out some alarming statistics in his New York Times article A report on inequality from the Congressional Budget Office
Between the end of World War II and the late 1970s, income inequality in the U.S. was reduced; but since 1970s, the situation with wealth distribution has changed. Data from tax returns in 1976 show that the top 1 percent of households received 8.9 percent of all pre-tax income. In 2008, the top 1 percent’s share had more than doubled to 21.0 percent.
Income inequality in the United States, as of 2007, has reached levels not seen since 1928. In 1928, the top one percent received nearly 24% of all income within the United States (Volscho & Kelly, 2012). This percentage fell to nearly nine percent in 1975, but has risen to 23.5% as of 2007 (Volscho & Kelly, 2012). Meanwhile, in 2007 (see
Lynch, David J. - "The 'Standard'" How Inequality Hurts the Economy. Bloomberg Business Week. Bloomberg, 16 Nov. 2011. Web. The Web.
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 gap in America has been increasing steadily since the late 1970’s, and has now reached historic highs not seen since the 1920’s (Desilver). UC Berkeley economics professor, Emmanuel Saez conducted extensive research on past and present income inequality statistics and published them in his report “Striking it Richer.” Saez claims that changes in technology, tax policies, labor unions, corporate benefits, and social norms have caused income inequality. He stands to advocate a change in American economic policies that will help close this inequality gap and considers institutional and tax reforms that should be developed to counter it. Although Saez’s provides legitimate causes of income inequality, I highly disagree with the thought of making changes to end income inequality. In any diverse economic environment, income inequality will exist due to the rise of some economically successful people and the further development of factors that push people into poverty. I believe income inequality e...
I will also discuss varying ways to measure wealth within and between countries, and define and explain the three sectors of the economy. The United States has not seen such staggering figures between the wealthy and the poor since the Great Depression. In my opinion, many of our countries problems stem from the unequal distribution of wealth. Wealth is unequally distributed in today’s society The unequal distribution of wealth is seen as a negative and ongoing problem and debate within American politics and society.
However, this rising inequality of incomes, would not be inconsequential, and the same could be said for inequality of wealth. Inequality has been linked to many negative factors, including health problems (Wilkinson), low class mobility (Krueger), social unrest (cite), and a lower level of productivity among the poor and middle class (cite).
If income inequality continues to grow, the economy will break down. For example, if the housing price continues to rise because of the rich people, poor people will not have a place to live since they cannot afford to buy these expensive houses. When this happens, it will create another housing bubble because the houses are not worth buying, which means the market value of the house exceeds the house’s value; therefore, nobody will buy the house including the riches since they already have houses to live. Moreover, poor people do not believe they can get access to wealth because they cannot afford anything, and they cannot afford the tuition fees for a good education, which is the traditional route to success.
Lower GDP for the economy also one of the consequences of unemployment in current time. High rate of this issue implies the economy is operating below full capacity and inefficient so that it will lead to lower output and incomes. Because people who are searching for their work usually will spend less in purchasing goods and