The problem of income inequality in the united states

Press release A more recent version of this report is available at epi.

The problem of income inequality in the united states

Overview[ edit ] Share of U. For example, the top 0. They became moderately less progressive between and [6] but slightly more progressive measured between and Income transfers had a greater impact on reducing inequality than taxes from to While before-tax income inequality is subject to market factors e.

The influence of the labor movement has waned in the U. Shillerwho called rising economic inequality "the most important problem that we are facing now today"[47] former Federal Reserve Board chairman Alan Greenspan"This is not the type of thing which a democratic society — a capitalist democratic society — can really accept without addressing"[48] and President Barack Obama who referred to the widening income gap as the "defining challenge of our time".

The first era of inequality lasted roughly from the post-civil war era or "the Gilded Age " to sometime around Highly progressive New Deal taxation, the strengthening of unions, and regulation of the National War Labor Board during World War II raised the income of the poor and working class and lowered that of top earners.

Wages remained relatively high because American manufacturing lacked foreign competition, and because of strong trade unions.

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By more than a third of non-farm workers were union members, [52]: This tremendously productive working class gets back for its own consumption a smaller part of its output and hands over in the form of profit to the capitalist owners of the instruments of production a greater part of its output than does either the English or the French working class.

Studies have found income grew more unequal almost continuously except during the economic recessions in —91Dot-com bubbleand sub-prime bust. Beforea larger share of top earners income came from capital interest, dividends, income from rent, capital gains.

Afterincome of high-income taxpayers comes predominantly from labor: Inthe Occupy movement drew considerable attention to income inequality in the country. Market income for a household is a combination of labor income such as cash wages, employer-paid benefits, and employer-paid payroll taxesbusiness income such as income from businesses and farms operated solely by their ownerscapital gains profits realized from the sale of assets and stock optionscapital income such as interest from deposits, dividends, and rental incomeand other income.

Higher-income groups tend to derive relatively more of their income from more volatile sources related to capital income business income, capital gains, and dividendsas opposed to labor income wages and salaries.

Other sources of capital income also fell: CBO estimated that "average federal tax rates under law would be higher — relative to tax rates in — across the income spectrum. The estimated rates under law would still be well below the average rates from through for the bottom four income quintiles, slightly below the average rate over that period for households in the 81st through 99th percentiles, and well above the average rate over that period for households in the top 1 percent of the income distribution.

The problem of income inequality in the united states

Lindert and Jeffrey G. Williamson contended that inequality is the highest it has been since the nation's founding. The share of incomes for those in the bottom half of the U.

5 facts about economic inequality | Pew Research Center

Pretax incomes for the top 0. The economists also note that the growth of inequality during the s to the s can be attributed to wage growth among top earners, but the ever-widening gap has been "a capital-driven phenomenon since the late s.

Causes of income inequality in the United States Illustrates the productivity gap i. Each dot is an industry; dots above the line have a productivity gap i. According to the CBO and others, "the precise reasons for the [recent] rapid growth in income at the top are not well understood", [58] [74] but "in all likelihood," an "interaction of multiple factors" was involved.

A study in the American Sociological Reviewas well as other scholarly research, using the broadest methodology, estimates that the decline of unions may account for from one-third to more than one-half of the rise of inequality among men. As unions weakened, the vast majority of the gains from productivity were taken by senior corporate executives, major shareholders and creditors e.

As unions have grown weaker, there has been less pressure on employers to increase wages, or on lawmakers to enact labor-friendly or worker-friendly measures.

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This would cause capital share to increase, relative to labor share, as machines replace some workers. Combined with the Party's expanded political power enabled by a shift of southern white Democrats to the Republican Party following the passage of Civil Rights legislation in the sthis resulted in more regressive tax laws, anti-labor policies, and further limited expansion of the welfare state relative to other developed nations e.

More important, soaring incomes at the top were achieved, in large part, by squeezing those below: Perhaps more important still, the wealthy exert a vastly disproportionate effect on policy. And elite priorities — obsessive concern with budget deficits, with the supposed need to slash social programs — have done a lot to deepen [wage stagnation and income inequality].

Relevant discussion may be found on the talk page. Please do not remove this message until conditions to do so are met. February Overview[ edit ] Real GDP per household has typically increased since the yearwhile real median income per household was below levels untilindicating a trend of greater income inequality i.

The decline measured for wages and salaries was 7. These trends imply income due to capital i.Jun 28,  · Income inequality is a problem because it causes divisions in our society and it causes instability.

The repeated attempts by the government in the last 4 decades to make the rich get richer has caused the inequality to grow, and it still continues to grow. In Inequality for All—a documentary with Robert Reich in which he argued that income inequality is the defining issue for the United States—Reich states that 95% of economic gains went to the top 1% net worth since .

Apr 29,  · Income Inequality Is Costing the U.S. on Social Issues Image A playground at a women's prison in Lusk, Wyo. Seven out of every 1, adults in the United States .

Income inequality in the U.S. by state, metropolitan area, and county | Economic Policy Institute

In the United States, wealth inequality runs even more pronounced than income inequality. The Forbes Source: Forbes. The most visible indicator of wealth inequality in America today may be the Forbes magazine list of the nation’s richest. In , the “poorest” American listed on the first annual Forbes magazine list of America.

In , income inequality was much higher in many states, metropolitan areas, and counties than for the United States overall. In the top 1 percent of families nationally made times as much as the bottom 99 percent. The United States Census Bureau studies on inequality of household income and individual income show lower levels of inequality than some other sources (Saez and Piketty, and the CBO), but do not include data for the highest-income households where most of change in income distribution has occurred.

Economic Inequality: It’s Far Worse Than You Think - Scientific American