[Class Title]
Income Inequality in America
Introduction
Income inequality is one of the most observable trends in the American society today. There are, for instance, super rich Americans with the resources that are exceedingly high compared to the average American wage earner. Over the years, the disparity between the rich and the poor in terms of income has been widening and it is widening rapidly. Income inequalities have become exceedingly unacceptable that it has become one of the most controversial and talked about topic in contemporary American society. In fact, this coming 2016 United States presidential election, one of the key issues is income inequality and how it can be mitigated. The United States is one of the few developed countries in the world that has a high income inequality. As the gap between the income of the rich and the poor increases significantly, income inequality must have a profound impact in society. When only a few are prosperous, only a few can also afford premium services. For the same reason, an increase in income inequality could also mean an increase of the disparity in lifestyle and wellbeing of society in general.
Increasing Income Inequality in the U.S.
Since the 1970s up to the present, there has been a rapid increase in the income of the top earners relative to the median and the rest of the American population (Stone, Trisi, Sherman, & Bebot). According to a study conducted by the Center on Budget and Policy Priorities (CBPP), the rate of increase in the income of American families during the 1940s up to the 1970s is almost the same (Stone, Trisi, Sherman, & Bebot). However, after the 1970s, the rate of increase of the 95% of the population has stalled while the incomes of the 5% of the population have steadily increased. The income of the top earning families grew rapidly as compared to the median and bottom earners, widening the gap of income inequality across families of different social status. Placing income equality into a layman’s perspective, an article by Nicholas Fitz in the Scientific American compared the wealth in the United States into a large pizza. According to Fitz, most Americans believe that there is inequality in the sharing of wealth, but they have not fully grasped how profound this inequality is. Most Americans, for instance, believes that more than half of the pizza goes to the 5% of the American population while the rest is shared by the remaining 95%. But according to Fitz, in reality, 84% of the pizza goes to the top 20%, while the bottom earners that comprises 40% of the population are only getting a share of 0.3%. By comparison, the Walton family, according to Fitz, has “more wealth than 42% of American families combined”.
There are many ways on how to measure income inequality. However, the most widely used procedure for measuring inequality recognized by the World Bank are the Decile Dispersion Ratio; the Share of the Poorest X; the Gini Coefficient of Inequality; and the Theil Index . The Decile Dispersion Ratio is the most straightforward way of measuring income inequality. It measures income inequality by determining the average income of the richest ten percent of the population and divides it by the average income of the bottom ten percent. The Share of the Poorest X, on the other hand, measures income inequality by comparing the income of the bottom poor to the income of the majority. The Theil Index is another measure of income inequality that aims to determine the level of entropy or randomness of incomes across the population. Just like how entropy measures the level of disorderliness of energy, the Theil Index aims to measure disorderliness of income distribution in a certain population (Rohde 2). But among the four types of income inequality mentioned above, the Gini Coefficient of Inequality is one of the most widely used. In the Gini Coefficient of Inequality, the income distribution in a particular society is compared to the hypothetical income distribution of a society wherein everyone is earning equally . In the Gini Coefficient of Inequality, a scale of zero (0) to one (1) is used. Zero (0) corresponds to a hypothetical situation wherein there exists complete equality while one (1) corresponds to total inequality; a hypothetical situation wherein only one person is earning an income. A Gini Coefficient close to the value of 0 means that there is low income inequality in a particular society while a Gini Coefficient that is near 1 means that the income distribution in a particular society is highly unequal. Most often, the Gini Coefficient is multiplied by 100% in in order to get the Gini Coefficient index. By comparison, the Gini coefficient of the United States is higher than other developed countries. According to the data acquired by the World Bank, between 2011 to 2015, the United States have a Gini coefficient index of 41.1, which is higher than most developed countries such as Germany, Hungary, Sweden, Denmark and Norway . China and the United States are almost equal in terms of the Gini Coefficient Index, which is almost ten points lower than the Gini Coefficient index of Australia and Japan .
Why is there a huge Income Disparity in America?
Many would agree that an ideal society is one wherein a nation’s wealth is shared equally and that the population equally share the prosperity of a nation. Such ideal situation, however, could not be achieved primarily because of the many factors that seem to favor the upper class of the society over the class. Education, for instance, is considered by many as one of the great equalizer of poverty. However, access to quality education is severely limited to low income families because of its high costs. Many Americans, for instance, could not go to college because they could not afford the cost of college tuition and other college fees. According to observers, only 30 percent of high school graduates proceed to college. This number is further lessened by those who drop out before graduating college. Over the years, the cost of college education has increased more than five times compared to basic commodities; making college education somewhat exclusive to only those families who are at the top of the income ladder . Education directly impacts the income inequality of a nation primarily because there is an observed huge gap between the incomes of college graduates compared to those who have not finished college. Apparently, poorly educated individuals end up in poor paying jobs while individuals who have acquired higher learning are more likely to get better paying jobs and are most likely to be promoted to higher company positions. Individuals who have not graduated from college end up earning half of the median income. Since there are a lot of individuals who are not college graduates, their low income draws down the overall income distribution, thereby increasing the income inequality of a particular population. Income inequality is also exacerbated by a huge wage gap between ordinary workers and the few people who runs a business entity. Company executives and CEOs, for instance, are paid a much higher salary than the majority who works for the company that are only earning minimum wage. While minimum wage earners are crippled by laws that restrict their earnings to a certain amount, CEOs and company executives earn salary premiums and incentives. The average CEO in the United States earn, more or less, $22 million annually, while the income of an average American is only $50,000 a year. By comparison, the CEO earns, at least, 400 times every year as compared to the ordinary employee. Technology is also a major factor that led to the increase of income inequality. The rise of factories and mass production technologies in the 1920s, for instance, has increased the earning ability of entrepreneurs while ordinary workers only rely on their wages. The technological progress coupled with the scientific management methods developed by notable industrialists such as Taylor and Ford greatly increased the wealth of entrepreneurs while worker salaries slowly increased as determined by minimum wage. The problem of uncontrolled migration is also worsening the income inequality in the United States. Many undocumented aliens, for instance, enter the United States undetected. Once inside, they compete for jobs with legitimate workers. And since most of them accepts substandard wages, illegal migrant workers are silent killers of legitimate employment, which further exacerbate income inequality.
Impact of Income Inequality
The increasing gap in the distribution of wealth in a country is an indication of a widening divide between the rich and the poor of society. There is a consensus among scholars that a huge gap in the income of individuals could result in several adverse impacts. The huge income disparity between social classes, for instance, can have an adverse impact on the quality of education. As the income gap widens between the rich and the poor, education disparity also widens because the rich gets better educated as they can afford expensive colleges and universities. Poor students, on the other hand, would have to settle for community colleges where the medium of instruction as well as the educational facilities is less conducive for learning. While factors such as parenting behaviors and parents’ education also affect the educational outcomes of students across all social classes, it is quite certain that income does play a huge role in ensuring quality education. The rising income inequality also impacts health care. In many affluent nations, health care is universal, but in the United States where income inequality is high, healthcare is also unequal. Because of the widening income gap, only a few people could afford a decent health insurance while most people do not have healthcare insurance at all. A pattern of spending has also been observed between the rich and the poor. According to scholars, rich people spend more on healthcare while they are still young while poor people starts spending on healthcare when they are already in their middle age until old age . However, when health spending is accounted, it appears that the poor are spending more on healthcare because of out-of-pocket spending as compared to those who are well-off. The healthcare scenario in the United States is a big irony primarily because the country has the best healthcare technology and healthcare providers in the world, but only a few can afford it. High income disparity also results to poor lifestyle. Since most people do not have enough income to spend for quality food, shelter and recreation, many people settle for mediocre life choices, which greatly impact their health and well-being. High income disparity can also cause many social ills such as delinquency and criminality. Many criminologists, for instance, observes that delinquent and criminal behaviors thrive in poor communities such as in the slum areas, which proves the validity of the assumption that income inequality negatively impacts society (Park, Burgess, & McKenzie, 1967, p.55).
Conclusion
Unlike many developed states, America is one of the nations in the world with a huge income disparity among its people. A few of its population are extremely rich while many of its people are suffering from the deepening poverty brought about by the rising cost of education, healthcare and primary commodities. The few rich controls the country’s resources enjoy many perks as they can afford most of the premium services of the country while the poor majority is left with substandard products and services. The rising income inequality in the United States is an alarming phenomenon that needs to be addressed. When examined closely, the highly unequal distribution of wealth between a few members of society and the general population reflects economic social injustice associated with most capitalist states. The government, however, could not force rich people to just give up their riches and distribute it evenly with the rest of the population. However, state should provide measures that aim to mitigate income inequality so that the country’s prosperity is equally shared.
Works Cited
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