Causes and Consequences of rising Income Inequality in the USA.

In America, wage inequality has grown sharply in the last 30 years. One-quarter of all Americans earn less than $10 per hour. This is concerning because it indicates that the majority of them are living below the poverty line. They are the people who support us with our everyday activities. It could be cashiers, nurse’s aides, fast food staff, or even you. In the same region, there are people who earn 50% of all wages. According to the current economic literature, it points out three main causes of rising income inequality in the USA of which am going to discuss them in detail.

Technology and Education.

In most companies and institutions, they always require ones education papers and a CV so as to gauge whether to employ you or not. Workers with high level of education and skills are being considered first and being paid well than with a person with low education and minimal experience and skills. According to Massachusetts Institute of Technology, Professor David Autor, the demand for skills and experience and high level of education has greatly increased across the globe and different companies. This is so because the workers need to keep up with the demand and produce a better product for the consumers. This, thus, has greatly increased the inequality between workers and hence causing others to earn less than the others. (Baranoff, 2015)

Trade and Globalization.

In our current century, trade between different countries is growing at a rampant speed. It is like the order of the day. For example, trade between USA and China, has really caused more harm than good. It has greatly increased the number of imports in the US economy of which US can make it for themselves. This has caused loss of jobs between individuals who originally produced the goods which are now being imported from China. This has left more people being beggars and living below the poverty line. (Baranoff, 2015)

Creation of Institutional Framework.

In this one, the creation of frameworks such as shareholders, deregulation and many more really affected the wages and the employment sector in a negative way. The government should focus mostly on increasing the wages and come up with a framework that will monitor on the increment of unionization and a full employment policy that will be there to protect the employees against the inequalities and their rights. (Baranoff, 2015)

Income inequality is highly blamed on the cheap labor provided by the fast food workers, cashiers and the nurse’s aid, unfair exchange, and outsourcing. The Chinese, also, should also stop offering cheap labor which has led to the closure of more than 20 percent of US companies since the year 2000. (Amadeo, 2017)

Consequences

Inequality affects growth drivers.

Higher inequality really affects the rising income. It lowers growth by denying the low income workers the comfort and favors which the high income workers have. It will diminish the education opportunities for their children. This will force them to take their children in a low class school and after that being unable to pay for their collage fee. As a result, labor productivity will reduce greatly than how it is in other countries. Also, it will deny them the comfort of living a healthy life because the money they earn cannot enable them to eat a well-balanced diet and also have a medical cover for his family.

Inequality in income.

In USA, the income inequality has really increased over the decades. A research shows that most people who benefit when it comes to increase increment are people on the top most well paid. The low paid ones, who do most of the donkey work, are never appreciated with an income increment but rather, it is always constant. (Norris, et al., 2015)

Inequality affects financial stability.

Research shows that inequality affects financial stability because the rich are given overexertions of credit cards, and they can also take mortgage with no stress. While the poor, they are denied such opportunities and forced to pay high taxes while they receive low wages. The rising influence of the rich and the constant income of the middle class and the poor has really raised an alarm on financial stability. It has directly led to the long term and short term growth of the country. (Norris, et al., 2015)

Inequality affects the Global Balance.

Higher top income shares coupled with financial liberalization, which itself could be a policy response to rising income inequality, are associated with substantially larger external defect hence brining more global imbalance. (Norris, et al., 2015)

Inequality leads to conflicts.

Inequality can lead to mistrust, quarrels and also it can damage and break the bond and cohesion between associations, individuals and companies hence, brining conflicts between the two parties. Inequality make everything look impossible. It makes the process of resolving dispute to look more difficult and pretty impossible. Inequality affects the economics of conflict, as it may intensify the grievances felt by certain groups or can reduce the opportunity costs of maintaining and joining a violent conflict. (Norris, et al., 2015)

To sum up the discussion, income inequality has no one cause, but rather, majority of causes which can be co trolled and rectified for the betterment of the country and the fairness of the people living in the country. Any major solution that address inequality must match the nuance and acknowledge the various factors that contribute to inequality.

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References

Amadeo, K., 2017. The Balance. [Online] Available at: www.thebalance.com[Accessed 18 february 2017].

Baranoff, O., 2015. World Economic Forum. [Online] Available at: www.weforum.org[Accessed 5 may 2015].

Norris, E. D. et al., 2015. causes and consequences of income inequality: a global perspective. s.l.:s.n.