The Causes and Impact of Income Inequality and the Growing Gap between the Rich and Poor in the United States.
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The Causes and Impact of Income Inequality and the Growing Gap between the Rich and Poor in the United States.
The growing income inequality and the widening divide between the rich and the poor is the defining challenge of our economies today. Globally, the gap between the rich and the poor in advanced economies is the highest ever. However, the emerging markets and developing countries register a somewhat mixed trend in income equality. Some countries show declining trends but pervasive inequities in access to education, health care, and finance. In the United States, the income inequality between the rich and everyone else has been steadily increasing by every statistical measure for the last three decades (Florida, & Mellander,2016). Using relevant literature, this paper will explore the causes and consequences of income inequality in the United States and recommend policy areas to dampen the effect.
Experts have described income and wealth disparity as one of the defining challenges of our time. It refers to how income is unevenly distributed among a population. According to McCall (2016), income inequality in the United States is so pronounced that America’s top 10% today averages at least nine times as much income as the bottom 90%. Rising inequality is a widespread concern in America. Its widespread causes and what can be done about it is a hotly debated area among policymakers and researchers. This paper aims to analyze various research literature and policy papers on income inequality in America to examine its causes and economic consequences and possible policy areas to reduce the growing gap between the rich and the poor.
Income disparity in America is an area that has elicited a lot of research interest, and there is also a lot of existing literature on the same. However, it is surprising that the challenge continues to persist with the income gap between the rich and everyone else widening further. This paper seeks to answer questions as to whether there is a policy gap in addressing income inequality. It also explores the previous literature’s findings on the economic causes of this phenomenon and what policy experts recommend. This study’s significance is premised on the fact that growing income disparity can have significant impacts on economic growth and macroeconomic stability since it concentrates political power and decision-making in the hands of a few individuals (Carvalho, & Rezai, 2016).
This research will take the form of a literature review. In this regard, the literature review will represent not only the study but also a methodology. As a data collection tool, literature review entails identifying, recording, understanding, meaning-making, and transmitting the information. The information collected from an array of the literature review will represent this study’s data. First, the literature review will focus on the previous knowledge on the causes and its impacts on income inequality in America. It will demonstrate why policymakers need to give more attention to the poor and the middle class. Earlier research has demonstrated that income inequality has significant impacts on economic growth and sustainability. The other part of the research will investigate the divergent trends on income inequality across America with a particular interest in the lower and middle classes. The literature review will conclude by reviewing technological progress and its contribution to inequality, policies that focus on the lower and the middle class, and nature appropriate policies depending on the factors underlying income inequality.
Annotated Bibliography
Carvalho, L., & Rezai, A. (2016). Personal Income Inequality and Aggregate Demand. Cambridge Journal of Economics, 40(2), 491-505.
This article is a theoretical and empirical investigation of how variations in income distribution can impact the aggregate demand and the demand regime of an economy. It presents empirical evidence from the US economy that the propensity to save increases from the bottom to the top quintile of wage earners. Using the neo – Kaleckian macroeconomic model, this article illustrates that the more equal distributions result in higher outputs while large disparities result in low output. This research is based on studies and data on income inequality in the United States between 1967-2010. It provides a good foundation upon which to study the issue of income inequality in the United States. This article passes for a credible source for this study.
Florida, R., & Mellander, C. (2016). The Geography of Inequality: Difference and determinants of wage and income inequality across US metros. Regional Studies, 50(1), 79-92.
This article published in the Regional Studies is a monthly peer-reviewed journal that dissects policy issues and empirical analysis in various disciplines. In this issue, Richard Florida and Charlotta Mellander investigate the difference and determinants of wage income inequality across US metros. This article explores the variations in wage inequality and income equality in the United States along geographical lines. The study focuses on the US Metros, where wage inequality is determined by skills, human capital, and technology. The findings showed that income inequality is strongly linked to race and poverty. This article is insightful and passes for a credible source of this study. It examines the drivers of income inequalities, which is also the interest of the current research.
McCall, L. (2016). Political and policy responses to problems of inequality and opportunity: Past, present, and future. In The Dynamics of Opportunity in America (pp. 415-442). Springer, Cham.
This research aimed to fill the gap in research on American norms of economic income and equality, focusing on the rising inequality in the past four decades. It examines three political and policy responses to the challenges of inequality and opportunities. It also examines how these policy responses sit within the perimeters of public opinion. In doing so, the author also examines equalizing opportunities to dampen the impacts of income inequality. It concludes by making recommendations to American policymakers to focus on both opportunities and outcomes so that political power and decision-making are not left in the hands of a few individuals. This article focuses on areas of interest in this research and therefore passes for a credible source of information.