Economic Inequality in the United States Today

Economic Inequality in the United States Today

The gap between the rich and the poor in the United States has been growing wider since the 70s (Adams, 2004). Today, over 90% of the wealth in the country is in the hands of 1% of the population, which represents the highest discrepancy in close to a century (Adams, 2004). Many theories and hypotheses have been put forward to explain the causes and effects of economic inequality (Adams, 2004). Many explanations have been based on the pie sharing concept that argues the rich become richer by taking away from the poor. Economic inequality is affected and caused by the interaction of many factors like level of education, technology, labor laws, tax policies, and supply and demand. There are three types of economic inequality; income, pay and wealth inequalities. This paper aims to form an objective analysis of the causes, effects and possible solutions to (or “intending to”) sustainability.

Although economic inequality affects the social, political, cultural and economic aspects of a community, not all the factors leading to its being are necessarily bad. Many theorists and activists have argued for the increase of taxation on the top 1% of the population (Rasmussen, 1997). Others have proposed that the government impose sanctions on companies that outsource cheaper labor from offshore markets (Rasmussen, 1997). Also, some scholars have also proposed that consumers boycott the products and services of companies that move their processes offshore arguing that they take jobs away from locals. Therefore, the greatest cause of economic inequality is the spirit of entrepreneurial in the country. As global competition increases due to advances in technology and globalization, many companies are opting to streamline their operations and processes to ensure good governance (Xhafa and International Labour Office, 2014). Due the increasing global population and the fast reducing resources and opportunities, more people are alienated from the products of their labor thus increasing the gap between the rich and the poor. This has an effect on the increase of dependence ratio (Adams, 2004).

Wealth inequality affects communities and societies in the following ways. First, studies have shown that the wealthy live longer than the poor. The lifespan of wealthy individuals currently stands at six years more than their poor counterparts. This has been linked to their access to better medical care, good living conditions, and better nutrition. Second, more children from well-off families are getting access to higher education. Since the job market is highly competitive, this puts children from humbler backgrounds at a disadvantage and further increasing the wealth inequality. Third, economic inequality slows down economic growth since the 1% with most of the money do not spend a lot of it while the other 99% do not have more of it to spend. When money does not circulate in the economy that created it, it results in a reduction in growth rate and often leads to money going to foreign economies.

Fourth, it also results in the destruction of democracy by influencing the outcomes of elections. The wealthy use their considerable financial and social influence to ensure the success of candidates of their choice. These candidates are usually sympathetic to their causes or have policies and agenda that are in line with those of their benefactors. The poor on the other hand abscond voting due to disillusionment. When elected officials fail to deliver to the poor, they resign to their neglected state and keep away from the ballots. Last, economic inequality inspires the entrepreneurial spirit leading to increased creativity and innovation. The wealthy 1% reached where they are by creating solutions to challenges and problems affecting many people. These solutions have increased cost and process efficiencies and led to the creation of many jobs in the process. The resulting increase in jobs effectively results in an increase in incomes which earns the government more revenues through taxation and fees. With more revenues, governments can improve infrastructure and social amenities which improve the quality of life for the poor.

Income and pay inequality significant contribute towards economic inequality. Pay refers to the amounts of money an individual derives from employment or a job only. Income refers to the total cumulative monies an individual receives from their active employments and passive investments. There are four ways that can ensure a sustainable solution to economic inequality and result in the empowerment of the poor. First, the government can ensure equitable access to good education by everybody regardless of their background. In today’s jobs market, a good education is a great asset in acquiring a good paying job. Companies are looking for the best talent, and the competition has increased due to globalization and the advancements in technology that make it possible for people to work remotely. Governments can ensure this by giving underprivileged children access to education loans to help them access good schools. They should also develop selection policies that ensure transparency and accountability.

Second, governments need to revise their taxation policies or risk losing their businesses and top talent to other countries. The wealthy already pay most of the taxes collected by governments yet derive the least benefit (Seguino, 2000). The wealthy help the government in creating jobs and other functions like housing and amenities. Further increasing their taxes is akin to punishing them for doing good deeds. With the increasing need to enhance good governance, the rich are more likely to move their companies and monies outside the country to protect their hard earned profits. Governments should, therefore, reconsider offering the wealthy and their companies financial and policy considerations to help them ensure good governance and maintain their competitiveness.

Third, governments can actively encourage entrepreneurship to increase the creation of jobs by creating institutions to provide financial and technical support to start-ups. They can also develop better policies to encourage more people to be innovative and come up with concepts and ideas that can make them a living while creating jobs for others. Policies that encourage local investment like tax incentives and fees waivers can go a long way in ensuring the budding and prosperity of new businesses and ventures. These governments will then experience an increase in their revenues from the increase in tax collections from the increase in the number of taxable workers.

Last, technology helps to cut costs in all sectors of society. It does this by increasing the ease of access to information and enhancing solutions delivery. Governments can ensure that all their citizens have access to affordable technology by creating favorable policies for technology companies to set up shop. They can also improve their tax regulations on the importation of technology and communications equipment and tools. Governments impose redundancy regulations to prevent the risks of technology dumping especially in developing countries. Relaxing their statutory manufacture date restrictions can be instrumental in ensuring that every citizen can have affordable access to technological devices and services. Technology also enhances communication channels increasing the ease of access to production and educational material and information.

The challenges of addressing economic inequalities will continue to persist until the United States actively changes the metrics they use in evaluating and analyzing it. The current discussions have the potential of alienating the wealthy and reducing creativity and innovation. They also have the potential of scaring away investors and making the wealthy invests their monies offshore effectively depriving the economy of enough money to circulate. New entrepreneurs will also be discouraged from participating in innovation and development for fear of being penalized with higher taxes and profit infringing regulations and legislations. Socially, the society will also suffer since people will put very little interest in education and personal development.

There are three types of economic inequality. Although 1% of the population controls about 90% of the wealth in the United States, they also contribute the largest part of tax revenues. They, however, do not benefit as much as their poor counterparts. Increasing the taxes on the wealthy could solve the economic inequality in the short term. In the long-term, however, it has the potential of alienating and angering the wealthy causing them to move their money and investments offshore. More sustainable solutions should involve the enhancement of the net worth of each citizen. When people can get equal access to education and opportunities regardless of their background, they can make enough income to move them closer to the 1%. Access to information and affordable access to technology enhances communications channels. Although economic inequality hurts the social, cultural and political fabric of society, it is also responsible for the development of entrepreneurship.







Adams, R. H. (2004). Economic growth, inequality, and poverty: Estimating the growth elasticity of poverty. World Development, 32(12), 1989-2014.

Rasmussen, J. L. (1997). Economic inequality, human rights, and labour markets. Netherlands Quarterly of Human Rights, 15(2). 143-160.

Xhafa, E., & International Labour Office. (2014). Trade unions and economic inequality: Perspectives, policies, and strategies. International Journal of Labour Research, 6(1), 35-55.

Seguino, S. (2000). Gender inequality and economic growth: A cross-country analysis. World Development 28(7), 1211-1230.

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