About Unequal income Distribution in the United States

The issue of income disparity

The issue of income disparity persists despite the fact that the United States is one of the richest and most industrialized nations in the world. When discussing the issue economically, income inequality can be defined as the degree to which income is distributed unevenly among various population classes (Atkinson & Piketty, 2007). As a result, members of various classes earn varying amounts of money; some are therefore richer while others are poorer. The disparity in wealth between rich and poor has been notably growing in the US. It has been notably evident over the past 30 years (Atkinson & Piketty, 2007). The leading economists and financial analysis are trying to determine the major reasons of income inequality and find possible solutions to the existing problem.

Reasons for Unequal Income Distribution in America

The reasons behind the income inequality in America are numerous; however, the most influential ones are cheap labor in China where most of the goods are produced, inequitable exchange rates, and outsourcing. Part of the blame can be casted on huge corporations which put profits ahead of their workers. In order to reduce the income gap, the U.S. companies should compete with lower-priced Chinese and Indian companies paying less to their workers (Frank, 2009). Because of such difference in the level of salary, most US companies try to invest in outsourcing and use cheap labor power abroad. Since 2000, the U.S. has lost almost 20 percent of its factory jobs which were well-paid. As a result, the economy witnessed the rise of the service jobs which are low-paid (Frank, 2009).

The next reason of income inequality is re-engineering of factories and companies which tend to switch to the hiring of more part-time or temporary employees who are paid less. In addition, most huge corporations which are largest employers in the USA change their policies of payment and benefits reducing the level of salaries and cutting the amount of employees’ compensation. Finally, technology can be also the reason to increase inequality. Due to the stable technologic advances introduced in American factories many workers at factory jobs were replaced, while the companies are more interested to hire those workers who are able to work with sophisticated equipment, while the others are fired.

Solutions to Unequal Income Distribution in America

Everyone understands the necessity to take immediate steps to deal with the problem as the income inequality gap is constantly increasing. Many economists state that the first solution can be preventing the US leading companies from outsourcing and use of cheap labor power in less developed counties, however, this measure is ineffective because the companies will be punished for responding to worldwide wealth redistribution (Corak, 2013). One of the most effective measures, according to the President Trump, is restriction of the immigrants influx into the country as they are the major source of law paid labor while Americans remain underpaid.

The next possible solution is making changes in the government tax policies related to cuts in the government regulatory agencies. These cuts result in less rigorous investigations of the labor disputes (Corak, 2013). Since the investment in regulatory agencies is higher, the work of trade unions is improved and workers can properly address the issues related to unequal wealth distribution (Levy & Temin, 2007). Finally, in order to decrease the inequality gap, the United States should accept the fact that a global wealth redistribution is taking place, therefore, the government has to make changes in tax policies, provide access to education to low-skilled employees so that not to hire low-paid workers.

References

Atkinson, A.B, and Piketty, T. (2007). Top Incomes Over the Twentieth Century. New York: Oxford University Press.

Corak, M. (2013). “Income Inequality, Equality of Opportunity, and Intergenerational Mobility.” The Journal of Economic Perspectives, 27 (3): 79–102.

Frank, Mark. W. (2009). ”Inequality and Growth in the United States: Evidence from a New State-Level Panel of Income Inequality Measure.” Economic Inquiry, 47 (1): 55–68.

Levy, S., and Temin, P. (2007). ”Inequality and Institutions in 20th Century America”. MIT Department of Economics Working Paper No. 07-17