Introduction
It is true that there is a significant disparity between the American in terms of classes in the United States today. The gap between the upper class and the lower class has been increasing, whereas the middle starts to fade away. Dating back to early 1990s, almost half of the national income growth of the nation was owned only the top 1 percent of the richest families. The escalating gap between the two groups is attributed to the ever increasing income to the wealthiest 1 percent and stagnant income for the middle American households. Therefore, the middle and the lower classes face significant challenges due to the increased cost of living. Many factors contribute to the widening gap that includes the tax code that favors the rich and emasculates those in the lower economic classes. The middle class plays an enormous role in the economy of the country, and this position is significantly undermined by the big gap between the upper and the lower classes that are seeing the middle class extinct. Unless the difference is minimized, the middle class may not be able to contribute to the economic growth of America in the future. The primary course of this paper, therefore, is to discuss how the income disparities prevail between the upper and the lower classes, causes for the differences, and finally, the role of the middle class in the economy and how the difference undermines it.
Income Inequality
According to the contemporary statistic presented by the Pew Research Center in America, the typical wealthy families own almost seven-time wealth as compared to the middle class (Neil, 2014). In 2012, the average wealth of the upper-class households in the United States was $639,400. This figure was 6.6 times more than that for the middle class which was at $96,500. The gap had widened from 2010 where the affluent class income was 6.2 times compared to the middle class.
With the rebound in the economy of America, the difference between the wealthy and the middle and lower class has increased. The difference as it has been reflected in the consumption characteristic for the three groups as by Pew. For a middle-class family of three, their income was around $38,000 whereas that for the upper class was $114,000 a difference of $76. The vast inequality worsened during the during the economic recovery period. For many years, the income inequality has increased as the revenue for the middle class remains stagnant. After the adjustment of inflation in 2002, for every dollar that the rich had in 1970, they had $5 more whereas the lower classes they only had 80 cents per dollar (Neil, 2014). Where remarkable increases were being realized among the higher classes, the pretax income for lower quantities more than 27%.
Main reasons for the Escalating Gap
Many political scientists and economics connect the fall of revenue among the middle class in America to various factors that include the tax evasion where the taxpayers with high-income are less compliant than all other income level groups (Avraamova and Maleva 2015). Other factors include a weak voice among the middle class in the electioneering elite. This elite pays little attention to the interest of the middle class. The electioneering elites have a substantial influence over the economic decisions, but in most cases, they do not take into account the voters' economic interests. Besides, other factors that contribute to the decline in the middle-class income include the transformation of patterns of voting, changes in the job market as the organized labor fall and the changes to the competition system. As a result of this, significant increases are realized in the salaries and profits at the highest level of the income scale with wages of many employees remaining constant.
Various scholars have also suggested that the outcome was due to the market forces. According to Avraamova and Maleva (2015), public and political laws substantially mitigated the pressure that leads to significant disparities depending on the primary orientation of those holding electoral offices and the political goals. The gap between the upper and the lower class has a significant effect on the middle-class participation in the economic growth as the group seems to diminish.
The Role of the Middle Class in the Economy
The middle class plays critical role in the society as they undertake key functions that facilitate steady economic development. During the dominant economic crisis in the 1990s, the middle class played crucial roles as the agents of adaptation to the changes that were taking place. Different strategies, including the production models of the economic and social code of conduct based on individual resources were adopted. Their adaptation saw the great success that improved the economic situation of the country. The middle class plays very many functions that were of great benefit to the economy as discussed in the subsequent paragraph.
First, the group is actively involved in labor on condition that there is at least one regular job. They also complied with tax payment terms despite the absence of verbal agreements that states the amount of compensation for the primary job of an employee in case of hiring workers and in the event of tax return filed self-employed individuals or entrepreneurs. Another significant role played by the middle class involves goods consumption where there exist many commodities of prestigious use. Besides, they contribute to the service consumption where they take more than one paid service that includes education, consumer services, and medical services among others. Another important role in the economic growth is that the middle class took part in active investment that accounted for a greater amount of savings. Finally, they also participated in civic events. This involves participating in election hence determining effective leaders that will ensure economic development.
The Impact of the Gap between the Upper and Lower Class to the Economy
After many years of surviving as the majority in the country, the middle-class group is now diminishing in numbers with the majority falling in the lower class and a few in the upper class. According to statistics presented by the Pew Research Center, there is a significant shift in the numbers between the three groups. The numbers for the lower and the upper classes have been increasing since 1971 whereas that for the middle class has been diminishing. This shift has had a profound impact on the role played by the middle-income class in the national economic growth.
The substantial change in the national aggregate household income from the middle class to the upper class has been realized. This trend is attributed to the increase in numbers of the upper class and growing gains among the top economic ranks. Typically, 49 percent of the United Nation’s aggregate income in 2014 was connected to the upper-income households and increase from 29 percent in 1970 (Neil, 2014). The share of the middle-class households was 43 percent indicating a substantial fall from 62 percent in 1970.
According to the data presented, it is clear that the middle-class contribution to the economy is diminishing as the group continues to reduce in size. The more the gap widens between the upper and the lower classes, the more the middle class continues to disappear. If the trends go on, then the middle class may not be able to contribute to the economic growth of the nation in future.
Conclusion
In a nutshell, from the discussion presented in this paper, it is evident that there has been an escalating gap between the upper and the middle class. The increasing gap has been exacerbated by a number of factors, especially during the economic crisis period in the 1990s. These factors include the political and market forces. It brought out. The trend possesses a great danger to the middle-class group whose number has been diminishing in the last three decades. This matter has substantially undermined their contribution to the economic growth of the nation.
References
Avraamova, E. M., & Maleva, T. M. (2015). The Evolution of the Middle Class: Missions and Methodology. Sociological Research, 54(5), 307-325.
Bullock, A. G. (2009). Tax Code, the Tax Gap, and Income Inequality: The Middle Class Squeeze, The. Howard LJ, 53, 249.
Neil S. (2014). Wealth Gap between America’s Rich and Middle-Class Families Widest on Record. Wall Street Journal.
