The Income Inequality in America - Case Study Example

Income Inequality in America Introduction It is common to hear nowadays the expression, “The rich get richer and the poor get poorer” (Alderson, Beckfield, & Nielsen 406). As a depiction of the American society in the past decades, this is somewhat true. The wealthy have actually become much wealthier. On the other hand, the poor for the most part have not become much poorer, yet increase in their income has been negligible, making the inequality between the haves and have-nots greater. A comparable widening has taken place between the upper class and the middle class (Mahler 1032). With income levels increasingly widening, it is not surprising that accrued wealth is becoming more condensed as well. This paper tries to answer the following question—why is it that income levels in America are not becoming equal, but more unequal? The discussion includes an analysis of the issue with the definitions of the concept of ‘rich’ and ‘poor’ and how it adds to the problem of income inequality in America. Background In discussing income inequality in America, many discover a language dilemma. The term ‘rich’ is debatable. Primarily, it does not have a working definition. The American government did not once provide rules on the income level required to be classified as ‘rich’. There are several methods used to determine who are the ‘rich’ and the ‘poor’. One could classify as rich those with a net worth of roughly $5 million (Gilbert 2). Or once could use the established ‘poverty line’ and ‘wealth line’. The dilemma with such definitions and methods is that they are basically subjective. They will disregard some individuals they may think are ‘rich’ or ‘poor’ (Gilbert 2). Another issue with the concept of ‘rich’ is the unwillingness of the people to whom it must be valid to approve of the classification. Strangely enough, a large number of wealthy Americans are ill at ease with being classified as ‘rich’ (Stiglitz 28). Maybe they oppose the category thinking that it gives them a somewhat arrogant, overly privileged, or superior image. But still the U.S. has constantly been a society where affluence breeds respect and awards influence and power (Boo 8). Being ‘rich’ refers to what majority of the American people imply when they say that a person is ‘successful’. The concept of ‘poor’ creates none of these issues. For the past decades, the American government has established poverty lines that precisely classify who are the ‘poor’. Any household in the U.S. can identify for itself whether the American government classifies it as ‘poor’ (Kelly 52). In addition, there is not a bit of uncertainty or inconsistency about the term ‘poor’ that characterizes the concept of ‘rich’. Individuals neither desire to be nor be ‘classified’ as poor. Somewhat inadvertently, this is precisely what the American government commits when it proclaims how many Americans are living below the poverty threshold (Fukuyama 17). Obviously, individuals who confront the repetitive dilemma of budgeting very little money, who have jobs that pay less than ten dollars an hour, and who do not have health insurance, do not have to refer to government criteria to know that they are poor. Reasons Throughout the recent three decades the gap between the upper, middle, and the lower class in America became much more evident. Individuals with large earnings took over a bigger portion of the country’s overall income, whereas the middle class witnessed a decrease in their share. However, this trend received little attention from the media and the public for it took place in percentage increases over the decades (Stiglitz 10). From the 1930s to the 1970s, the exact contrary had happened. The portion of the country’s income that flowed to the rich had either decreased or stayed unchanged (Alderson et al. 412). In the 1980s, at the initial indications that this was not occurring anymore, economists realized they were seeing a chance occurrence, a bizarre but momentary trend, or possibly a remnant of defective measurements. However, they were not. Income democratization that the American people had long ignored as a good reality of contemporary living was inversing itself. In the end it was the continuous increase in income inequality that the American people ignored (Noah 4). The disparate wealth of the upper and the middle class became a stubborn reality of daily existence that people rarely paid attention to it, except maybe to notice sometimes with a sigh that life was unjust. First, the broadening gap between the rich and the poor is partly caused by the gap between the earnings of CEOs at leading American companies against the salary of average employees underneath them (Gilbert 3): In 1965, the average CEO salary in the United States was 24 times that of the average worker; by 1989, the ratio had climbed to 71; by 1995, it was 100; and in 2005, the ratio had reached 262. Basically, the inequality between the high-income and middle-income group is currently has increased tenfold within a matter of four decades. Executive salaries have climbed sharply that it is raising concerns even within the walls of The Wall Street Journal and Fortune (Gilbert 3). In some other developed countries, the discrepancy between executive salaries and average employee compensation does not reach what is seen in the U.S. This is largely due to the fact that CEOs are compensated much less, say, Japan and the UK, than in the U.S. (Fukuyama 28). Secondly, regardless of their opinion on income inequality, majority of the American people have been disposed to or eager to accept a high level of economic inequality, partly due to the belief that America is a society wherein everybody has the opportunity to be economically successful (Noah 5).The concern of the public today is the likelihood that the movement toward higher levels of inequality could be making America more inelastic or immobile. People tend to believe that the American society is a land that has become more and more equal as time passes by, and quite apparently that is correct (Mahler 1034). When the republic came into being, African Americans remained under the institution of slavery. Suffrage was granted only to property-owning adult white males. Eventually, after many decades, total citizenship rights were awarded to those who did not have properties, to racial minorities, and to women. All these groups had to go through difficult barriers in their quest for justice and fairness. Hardly any of those who belong to any of these groups would assert that this quest culminates with the elimination of definite legal obstacles (Hacker & Pierson 14). Yet, many would possibly argue that equality in America is declining. Thirdly, the nation’s evolution from an agricultural society to a highly industrialized country during the 19th and 20th centuries had brought into being an era of severe economic inequality (Noah 3). However, from the 1930s to the 1970s, income levels became more equitable, and stayed that way, as the industrial economy held on to its rough vigor. As the 1970s advanced, such vigor declined, yet income distribution stayed the same. Alan Blinder, a Princeton economist, explained in 1980, “As measured in the official data, income inequality was just about the same in 1977… as it was in 1947” (Noah 3). Yet, Blinder seems to be unaware of the fact that this was by that time starting to transform. Once the economy recuperated in the early 1980s, income levels reached even greater imbalance. They are still widening up to this very day (Kelly 39). By the 1970s, the dominant assumption among economic experts was that income levels in any developed democracy would unavoidably become more equitable or stay unchanged in their distribution. They definitely would not move towards greater inequality (Fukuyama 22). That unfortunate outcome was confined to societies at the initial growth phase or where the totalitarian authority of the government concentrated privilege on a select few to the detriment of the masses. According to Stiglitz (2012), in free, developed, and cultured societies, the inequalities between the haves and have-nots did not widen. The U.S. is not the sole developed democracy where income levels have reached greater inequality in the past decades. This pattern is seen worldwide. A 2008 statement by OECD, which comprises 34 market-based democracies, reported that income inequality had grown in most OECD nations since 1980s (Noah 4). Yet the extent and progress of income inequality in the U.S. has been especially severe. Numerous changes in the world economy are pushing greater income inequality in several nations outside the U.S., but this phenomenon has been abnormally persistent in America. Response to Opposing Viewpoints Although the continuing movement toward inequality is unquestionable, there is a dynamic array of ideas about the significance of the pattern, the basic causes of it, the potential solutions to it, and the appropriate function that the government should fulfill in the process of overturning or slowing it. Nevertheless, it is essential to mention that economic disparity is not an intolerable evil. Some could find it displeasing or morally unacceptable. It could bring about health problems, anxiety, stress, resentment, and envy. It could undermine social unity. It could encourage fraud and dishonesty in the workplace. Yet, on the other side of the coin are a number of benefits from such economic inequality, and they are ample. Inequality fulfills a part in encouraging personal entrepreneurship, industry, novelty, and effort. Without such attempts of average individuals, risking everything to attain higher income for their families and themselves, it is difficult to imagine how an economy could continue to grow and progress. Considerations of inequality that disregards its beneficial features, thus, offer an imperfect picture and should not be the foundation for policymaking. The American people often mention the concept of ‘American exceptionalism’—a belief that the U.S. is qualitatively distinct from other countries-- to refer to the thing that makes the nation more fortunate than all other societies. However, American exceptionalism can also depict deep-seated features of the nation’s government or economy that place it at a disadvantaged position on the global arena. Income inequality is a specific, evident proof of the uniqueness of the American society. Conclusions Income inequality in America is not a one-sided phenomenon, but a complicated one. Many factors have to be considered when analyzing this trend, such as how the concept of ‘rich’ and ‘poor’ is defined and how households are classified based on their income levels. However, regardless of these factors, one thing is certain from the observations of economists over the decades—income inequality in America is continuously widening. There are three possible reasons to explain this persistent trend: first is the widening gap between high-paid and average-paid employees; second is the obsolete idea that America is the ‘land of opportunity’; and, third is the evolution of America from an agricultural society into an industrialized country. The widening inequality between the haves and have-nots could be causing deterioration in social and economic mobility in the U.S. If correct, this would be a severe damage to the reputation of the American society as a ‘land of opportunity’. A nation wherein some are capable of occupying and keeping the upper strata of the hierarchy for their progeny whereas others are bounded to the bottom with almost no chance to climb to the upper rungs, satisfies the criteria of a caste system instead of a vigorous, democratic nation. Works Cited Alderson, Arthur et al. “Exactly How Has Income Inequality Changed? Patterns of Distributional Change in Core Societies,” International Journal of Comparative Sociology 46.5(2005): 405-423.Print. Boo, Katherine. Behind the Beautiful Forevers. New York: Random House LLC, 2012. Print. Fukuyama, Francis. Falling Behind: Explaining the Development Gap between Latin American and the United States. Oxford, UK: Oxford University Press, 2008. Print. Gilbert, Geoffrey. Rich and Poor in America: A Reference Handbook. Santa Barbara, CA: ABC-CLIO, 2008. Print. Hacker, Jacob & Paul Pierson. Winner-Take-All Politics: How Washington Made the Rich Richer—and Turned Its Back on the Middle Class. New York: Simon and Schuster, 2011. Print. Kelly, Nathan. The Politics of Income Inequality in the United States. UK: Cambridge University Press, 2009. Print. Mahler, Vincent. “Economic Globalization, Domestic Politics, and Income Inequality in the Developed Countries: A Cross-National Study,” Comparative Political Studies 37.9(2004): 1025-1053. Print. Stiglitz, Joseph. The Price of Inequality. New York: Allen Lane, 2012. Print. Timothy Noah. The Great Divergence: America’s Growing Inequality Crisis and What We Can Do About It. New York: Bloomsbury Publishing USA, 2012. Print. Read More