‘The richer grow rich, and the poorer grow poor” is the condition of many under-developed countries. And unfortunately, this is a widespread ‘disease’, which can conquer developed countries too. Though the economy is not the only criteria for development issues, it certainly commands over a nation’s world status and has paced everyone upwards in the rampant race of grasping money tight. However, this infatuation has given rise to the threat of income inequality with-in a country; notably the rise which the US is currently passing through.
Many studies have been engrossed in the trend of induced income inequality of the United States. Reviewing logs between 1979 and 2007, CBO stated in 2011 that in US the top earning 1% of households had a hike of 275% in their income after federal taxes and income period. As of the state of the 60% of middle class American households, a gain of 40% in their income was seen. Continuity in this trend was marked in 2012 when the income of the wealthiest 1% of the population rose by 20%, while that of the remaining 99% rose by 1% in comparison. The widened gap between rich and poor has had an adverse impact on the US economy.
The causes of such startling statistics are left to mere questions with ambiguous answers. Especially with their negative effects, the causes seem unjustifiable. A technical factor behind this inequality is the capital gain that which rich people solely benefit from. They invest their capital in personal assets, such as land. As a result, their wealth attains a stagnant position, contrary to the earnings of a middle class man, which ironically ends up being added to the rich people’s businesses of food, shelter and clothing.
Further, the expense of education in US has produced exclusivity in distribution of skills and knowledge. This has rendered the manpower of US’s unskilled, leading to outflow of money and technologies to other countries like India and China. Basically, the uneven income distribution in US has ushered economies of other countries into prosperity, and has lead its own into a fragile position.
Moreover, the social and psychological boundaries that unequal income inflicts on a population reinforce the inequality that will continue for generations. For instance, a child of middle class background will definitely face hindrance in his/her education that may limit the person’s economical reach in future.
According to the Gini coefficient, which measures the equality of income distribution in a country, the US is closely approaching a level of inequality beyond which any economy is bound to drop drastically. Many economists fear the arrival of this grave state in the US. And no matter how rich a country is, unequal revenue distribution can never guarantee long stay of a strong economy.