InCome Inequality

Income Inequality

Throughout American history there has been an income gap and it has been steadily widening for years. In our recent society the income gap is beginning to become a serious problem that needs to be fixed. Due to changing households and industrial restructuring the income inequality gap has become the widest it has ever been in 30 years. Income inequality not only negatively effects economic growth and educational opportunities, it also negatively effects the health and happiness of all citizens. Although income inequality is the result of a well run capitalist society, I believe that the gap is becoming too large and needs to be stopped. Steps can and need to be taken by the government and citizens to shrink the gap and there are ideas given by Bernie Sanders, senator Jeff Bingaman, and Bill Gates, such as growing the middle class, controlling the top percent and more, that can provide that decrease in the gap.

To first understand income inequality and the importance of it I must explain what it is, how it's measured, and how bad it has gotten. Income inequality is simply the gap between the rich and poor. Now some people may say there should be a gap between rich and poor because that's what a capitalist society implies and that is true, but it should not be as wide as it is. Because income inequality is measured in many different ways, I will only explain a couple just to get the idea. The Census Bureau gets their information through an organization called ASEC, Annual Social and Economic Supplement, which annually provides information on earnings, dividends, and cash benefits of households. These measurements are then used to find household incomes before taxes. Sometimes an equivalent adjustment is taken into account, which takes into account that some households are bigger than others, but have the same income as a smaller household would (Stone). These measurements show how income inequality is effecting the nation and they are important to keep track of history and to learn from. Because the income inequality gap is measured from the Census Data, we are able to look into history and see how much income inequality has changed and how bad it has gotten. From 1979 to 2007 the top one percent tripled their incomes, while the median household only increased by about 25 percent and this increase was due to an increased number of work hours in the labor force(Gordon). This portrays the widening gap of inequality by showing that the top percent are getting much more, while the lower and middle class are only getting a small fraction more. Along with this, middle class families make no more now than they did in 1979. Collin Gordon, wrote an article on income inequality, said " the recent spike in inequality has simply hardened that dismal American admonition 'choose your parents wisely'"(Gordon, Colin). Obviously none of us can chose our parents,we do not get to chose if we're born wealthy or poor; black or white; male or female. All of these things have a role in how income inequality is formed. If someone is born rich then they automatically have more opportunities than someone who is born poor. Some people may think that in the 21st century race and gender are not a problem, but the problem is that these beliefs that people have are rooted so deep into America's history that it will probably take a while for them to be gone. For now all of these things still play a role in the economy and inequality.

It is also important to know that there is a difference between income and wealth. Wealth is the amount of money a person has including their property and financial assets, and excluding their debts. Income is how much a household makes over a year. Wealth is much more concentrated then income. For example, while the top three percent have about 31 percent of the nation's income, they own 54 percent of the nation's wealth. In addition, the bottom 90 percent only have 53 percent of the nation's income and 25 percent of the wealth (Stone). It isn't very fair that the top three percent own more than half of the nation's wealth and 30 percent of the income. Inequality is beginning to reach a point where it will hurt our nation more than help it.

Another example of the wideness of the income inequality gap is the amount CEOs make versus how much their employees make. During the 1970's CEOs used to make about 25 times as much as their employees; however, today CEOs make around 300 times as much as their employees and this is just an average(Covert). Some companies such as Discover Communications, Chipotle, CVS Health, and Walmart earn more than a thousand times as much as their average worker (Che). Although this is again from a well run capitalist society, this is too much seeing as the workers do a fair amount of the work. Why should CEOs make 300 times their workers? It is understandable that they make more than their workers but only to an extent. To solve the problem the SEC, Securities and Exchange Commission, has approved a rule that would make the CEOs disclose their pay ratio (Che). This will help the companies to be more strict in their practices.

Some things that contribute to the growth of income inequality are changing households and industrial restructuring. An increase in households headed by single females tend to have lower incomes and households with single earners rather than multiple earners (McLaughlin). In our society today being a single mother or father has become more acceptable and so have divorces. There was a time when these things were not acceptable, when the women would stay home and care for their family while the father would go off to work. Now fathers and mothers both go to work, so there is more income flowing through the economy creating more inequality. Because of industrial restructuring service jobs are associated with lower wages, there has been a decline of unions, and technology has lowered wages and employment. All of these things lead to a greater demand for people with higher education, which in our economy today is very hard to accomplish (McLaughlin). Globalization which is when national economies get mixed into wider international economies also plays a big role in inequality. This has come about due to new technology and a growing population. For example, the development of internet has made purchasing goods across the world much easier and affordable. Also, the invention of planes and ships has lowered transaction costs making global trading more efficient and quicker. These things have thus created a tension between markets and social groups and has made our nations very interdependent (Brittain). When we trade globally there are fewer opportunities and jobs for those of us living here, which widens the income gap.

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