Title: What’s caused the rise in income inequality in the US? | World Economic Forum
Headings: What’s caused the rise in income inequality in the US?
What’s caused the rise in income inequality in the US?
License and Republishing
Written by
Subscribe for updates

Content: According to this hypothesis, growing trade between the United States and the rest of the world, especially China, has increased the number of imports in the U.S. economy, which has led to job loss in industries that originally produced these goods in the United States. Offshoring has also affected jobs and wages. Both these trade phenomena lead to declining employment, falling labor force participation, and weak inflation-adjusted wage growth. Possible policy solutions for this trend include those that would make U.S. exports more competitive, among them the depreciation of the U.S. dollar. The last explanation suggests that U.S. government policies created an institutional framework that led to increasing inequality. Since the late 1970s, deregulation, de-unionization, tax changes, federal monetary policies, “the shareholder revolution,” and other policies reduced wages and employment. This explanation would seem to call for policy changes such as increasing unionization, better supervision of Wall Street, raising the minimum wage, and maintaining a full-employment focus in monetary policy, to address inequality and declining wages. These three main explanations for income inequality show the difficulty in pointing to one cause of inequality over others. Researchers’ emphasis on disentangling causes of income inequality is relevant to understanding the issue, but it also highlights the complexity of factors that contribute to labor market inequality. Income inequality has no one cause.