Income inequality in the United States Cause and Effect

Over the last few decades, income inequality in America has risen dramatically. In comparison to other developing countries, the United States could have greater wage inequalities. According to Packer’s book The Unwinding, about 1% of the rich in the United States earn 40 times more than the bottom 90% of the population in terms of personal income (Packer 21). Notably, the pay inequality in the country is disturbing, and has drawn the interest of many scholars who have sought to find the root cause of this crisis. Furthermore, the effects of large income inequality are disastrous and restrict growth. As such, the massive income inequality proves to be damaging and hurting the US economy, and this calls for policies that will help in addressing this social problem.

Causes of Income Inequality

Globalization is blamed for the wide income inequality in the US. Globalization has resulted in integration of economies, trade, and jobs. The innovations that are evident in the supply chain management between countries make the shipment of goods overseas to be cheaper. With globalization in the global economy, America no longer dominates most global markets as it used to before. Other nations such as China and Japan have ventured into markets abroad and thus created stiff competition in the market. Simply put, the act of globalization has resulted in competition for markets. Thus has pushed America to reduce wages of employees in order to cope with the competition. Indeed, United States is stuck in the deep craters of the global landscape causing frustration of income inequality that becomes hard to endure and in turn widens the income inequality.

The level of education has also been a fundamental factor that has fueled the wide differences in the wage gap. Skills and expertise of individuals are highly correlative with the level of educational attainment. Many employers relate higher educational qualifications to higher skills and expertise and thus greater economic rewards. The need to realize huge revenues in the post-industrial society has made many organizations seek for more expertise in attempts to enhance revenues. Discrepancies in economic wage in the job market due to educational attainment only cause income inequality. Porter indicates that “In contemporary America, education is widening inequity, not closing it” (Porter). The poor struggling families are normally unable to fund their educational needs, and thus they fail to have the required skills and expertise. The rising fees in the colleges and universities render many of the low-income families uneducated and thus unable to secure well-paying jobs.

Undeniably, the growth in technology has significantly broadened the income gap. Technology renders people of all skills to be jobless. The advent of computers and machinery has made many of the unskilled workers unemployed. These machines perform many tasks that the low-skilled workers used to do. Organizations are replacing human labor with machines due to the underlying idea that machines work more effectively in aspects such as manufacturing and packaging drives. Additionally, the skilled workers have not been immune to the technology nightmare. In fact, the fast developments in artificial intelligence have allowed computers and robots to perform the knowledge-based jobs for the skilled workers. Therefore, the low demand for human labor has dramatically reduced the wages (Wilkinson and Pickett). Even though the nightmare of technological advancement affects both the skilled and the unskilled workers, the outcome of this impact is more profound to the unskilled workers.

Effects of Income Inequality

The effects of income inequality in the US have painted detrimental outcomes. A sustained income inequality limits economic growth, particularly in the long run. A high level means that the poverty rate is also high. An increase in poverty translates to an increase in poor public health and a rise in the crime rate. These factors exert a burden on the economy. Notably, in the face of increasing low incomes and high prices due to wage inequalities, growth declines. Inequality also encourages the development of inefficient tax structures that are skewed to favor the wealthy individuals. Besides, income distribution inequality increases political instabilities and discourages capital accumulation, which hinders economic growth. The inequality-crime correlation results as the poor members of society suffer from resentment and hostility coupled with competition over scarce jobs. Consequently, there is a higher propensity for criminal behavior to emerge. People are willing to risk their lives and involvement in illegal activities as a method of finding livelihood and care for their families. Inequality leads to poor standards of living and health among people. Families with little or no income tend to be impoverished and register higher mortality rates. To wealthy people, cases of obesity and chronic diseases are prevalent.

Conclusion

The rising cost of income inequality in the US keeps getting uglier every day. Today, the income disparity between families is pronounced, and this critically affects the economy. Income disparity is caused by various factors, including globalization, education level, and advancement in technology. Its effects include a decline in economic growth, poor living standards, a rise in the crime rate, as well as political instability. Therefore, the problem of rising income inequality has to be addressed in order to save the economy.

Works Cited

Packer, George. The Unwinding. New York, Farrar, Straus and Giroux, 2014.

Porter Eduardo. Income Inequality Is Costing the U.S. on Social Issues. New York Times. April 28, 2015. https://www.nytimes.com/2015/04/29/business/economy/income-inequality-is-costing-the-us-on-social-issues.html. (Accessed on 2 November, 2016).

Wilkinson Richard and Kate Pickett. How Inequality Hollows Out the Soul. New York Times. February 2, 2014. https://opinionator.blogs.nytimes.com/2014/02/02/how-inequality-hollows-out-the-soul/. (Accessed on 2 November, 2016).