Income inequality has been a growing issue within the U.S. for decades. People are becoming increasingly richer while the poor somehow becomes poorer. People are starting to see polarization and communities are becoming increasingly divided. Many would think if this was an ongoing issue, then why is this widening gap continuing to increase? First, it is important to understand what economic inequality means; economic inequality is defined as the difference in wealth split between groups within society. This ongoing issue is hard to resolve since there are several different factors attributing to the cause, but by recognizing these key factors Americans can find ways to help diminish the wealth gap.
A contributing factor that keeps the rich richer and the poor poorer, thus perpetuating income inequality, is the gender pay gap. There have been many different studies and articles written to prove and disprove that there is a difference in pay between genders, nevertheless, there have still been studies showing the difference in pay even though it may not be substantial. In an article by Abigail Hess of CNBC, in the U.S., “it is often estimated at around 80 cents earned by women for every dollar earned by a man” (cnbc.com). When looking at the income data in the U.S. there is a wage gap in each state, some are greater than others. In 2018, the American Association of University Women (AAUW) collected data from the median annual earnings ratio by state and gender; “the state with the largest gap was Louisiana, which had a gender pay ratio of 70%; the state with the smallest gap was California, with a gender pay ratio of 88%” (aauw.org). Rising inequality affects everyone and not just the growing urban areas. Other factors that contribute to women earning lower earnings are discrimination, lack of paid family leave, subsidized childcare, and more. Ways that can combat these issues are taking equal pay opportunities, fighting against stereotypes and segregation, and improving work benefits for families.
The labor market takes a huge role in the lack of income equality; with so many competitive fields and people applying for these jobs, there has been a shortage and more challenging requirements of job openings. Ben Bernanke, former federal reserve chair, states that “gross domestic product is expanding, but median income is not growing substantially” (shrm.org). With limited jobs and opportunities, it becomes harder for people to move up the ladder, this results in less wage growth and career opportunities. Another result of limited jobs leads to more people staying at their current jobs; this results in fewer opportunities for potential job seekers and less movement around the workforce. Job fluidity has declined in all 50 states and every major industry within the past five years. Wage growth is moving frustratingly slow right now, which is surprising because right now unemployment is very low; this is a result of low productivity. In the U.S. productivity has been declining. Professor Jake Rosenfeld of the University of Washington states that “labor productivity grew at an average of 2.1% from 1987 to 2004; since 2011, labor productivity growth has fallen to an average of 0.7%” (businessinsider.com). Giving more American to chance to showcase their skills, hard work, and new talents could help move the economy in the right direction.
The rich are becoming increasingly richer while the bottom percent continues to stay steady. A 2017 study by economist and UC Berkeley professor Emmanuel Saez claims that the “richest 1% take in 188 times as much as the bottom 90%” (inequality.org). It becomes increasingly difficult trying to fix this issue when the top percenters are doubling their income while most Americans are continuing to struggle to take care of basic needs like their home and families. In Saez’s study, he states that “an estimated 43.5 percent of the total U.S. population (140 million people) are either poor or low-income” (inequality.org). During financial crashes, such as the ones in 1929 as well as 2008, it is much easier for the rich to recover from economic catastrophes. This gap is expected to grow larger as a result of the tax cuts, which essentially benefit the wealthy. The top 1% are projected to collect 27% of benefits from the cuts in 2019.
The contributing factors showcase how negativity impacted the U.S. economy is becoming; they lead to not only one but many other harmful effects on the U.S. More economic inequality leads to greater levels of poverty. The wealthy citizens have more political power than then the poor, which results in neighborhood developments favored and geared towards the wealthy, otherwise known as gentrification. Besides the aesthetic appeal of opening trendy cafes and building new apartment buildings may seem like a good idea because it brings more money and people into these communities, but it is making it harder and almost impossible for people who lived in these areas before to even afford their current living situations. According to the American Community Survey, “poverty remains two-thirds higher in urban cores than in suburbs. Many longstanding middle- and working-class neighborhoods are disappearing” (city-journal.org). The people that matter the most in these communities are being driven out by upper-class individuals. “Teachers, firemen, and police officers are struggling to afford homes in many American cities” (city-journal.org). How do we expect our educators or nurses to do their best and put in their hard work if they are having to commute two hours to even get to work? We see Americans flocking to these big cities such as San Francisco, Los Angeles, and Portland which are all being flooded by homelessness now more than ever. An increase in homelessness can lead to an increase in crime in neighborhoods.
Economic inequality and crime are very closely correlated. In a study by researcher Nicholas Birdsong, he states that economically unequal societies have higher crime rates. That survey concludes that inequality is the single factor most closely and consistently related to crime. Most crime-related offenses by the homeless are due to petty theft as well as public disorder. Most individuals who commit these crimes have no resources to pay for bail or an attorney and eventually stay longer in jail than most who could afford those resources. Many individuals who go to prison and were not homeless at first end up becoming homeless. It is a never-ending cycle for these individuals; they aren’t given the right resources to escape these communities that they have always known as home. These underprivileged communities are unsafe because they are also known to have reduced law enforcement; wealthy areas can afford police, and more of them leave poorer areas with fewer officers. People living in these low-income communities also feel unsafe with police because they believe officers are biased toward them because of their gender, race, or sexual orientation. It almost seems impossible to combat these issues when there are so many all at once. Figuring out the root of these issues is the only way to save these communities. Some ways to improve underdeveloped communities are having a diverse range of people with different incomes, providing a better education system, and providing higher-wage jobs.
Low-income communities have a decrease in education. “In an economically unequal society, the society-wide average level of education decreases, while the number of educational elites increases” (sevenpillarsinstitute.org). A lack of proper education for many of the people living in these communities starts in childhood. When these children become adults, they usually do not have the funds to afford college and further their education; ultimately, they are unable to apply for higher-wage jobs and end up staying in their low-income communities. Schools in these communities also lack school supplies, ranging from laptops to even up-to-date textbooks. Teachers and parents end up having to pay for these supplies out of pocket, which can be very expensive. Without the proper educational system, the future of the economy cannot excel because of the lack of properly educated workers.
In conclusion, there are several effects on unequal income and wealth in the U.S. Most attributing factors are negatively affecting the economy and widening the gap between the rich and poor. There may not be a final solution to completely fix income inequality, but there are steps the government and people in their communities can take to help improve the unbalanced economy the U.S. is currently facing.