Introduction
Wealth and income inequality are global problems that result from various individual and societal factors. Although income inequality and wealth inequality may seem similar, they are two distinct concepts. While income inequality is the degree to which a population’s wealth is unequally divided, wealth inequality describes the disparity between people of different socioeconomic backgrounds in a given community.
The paper will explore different methods a nation might use to measure income inequality and explain how the standard for gauging this disparity evolved in the US between 1940 and 2020. Next, the essay examines the impact of globalization and technology on inequality. Additionally, it addresses healthcare inequality as a factor that contributes to income and wealth inequality and the potential impact of extending access to low-cost or free healthcare on reducing income or wealth inequity. Lastly, recommendations will be made on how to address inequality from the perspective of a federal policymaker. In general, this essay provides a comprehensive explanation of the complex issues of wealth and income inequality and presents suggestions for solving these problems in the United States.
Measures of Income Inequality
Income inequality refers to the unequal distribution of income within a given population. Some of the measures that can be used to measure income inequality include The Lorenz curve, the Gini coefficient, decile ratios, the Palma ratio, and the Theil index (Horowitz et al., 2020). There are advantages and disadvantages to using each measure. Therefore, to choose the most appropriate one, one must be aware of what they are quantifying. Governments use statistical tools like Lorenz Curves and Gini Coefficients to measure revenue disparities.
A Lorenz curve is a graph that depicts how prosperity is dispersed throughout a community. The greater the slope of the graph that results from this bisector, the greater the degree of economic inequality (Horowitz et al., 2020). The Gini coefficient precisely measures income dispersion across all income ranges. It combines details and common data.
The Gini figure is the most obvious and widely used measure of inequity. Values can be anywhere from 0 to 1, with 0 denoting complete equivalence and 1 total dissimilarity. Values can be anywhere from 0 to 1. A larger wealth gap exists if the measure is higher. Studies have shown that accessible measures generally concur with one another when analyzing the levels of inequality in various countries, although each of these measures has strengths and limitations (Trapeznikova, 2019). However, the degree of disparity in a nation depends on the measure and variable used. If decision-makers cared more about the poor, they would use the Palma ratio to gauge disparity rather than the Gini index and focus on spending figures rather than income data.
United States Income Distribution from 1940 to 2020
Since the country’s inception, income disparity has been a serious problem, with an extremely wealthy elite controlling most of the country’s wealth. Slavery, immigration, and detention centers all contributed to greater economic disparity. After World War II until the 1970s and again before the Great Recession, economists identified two distinct eras of disparity in the United States. During this period, income disparity in the United States was minimal, as indicated by a stable or decreasing Gini index from 1947 to 1970 (Kuhn et al., 2020). Postwar tax policies, including Social Security and unions, increased low and middle-class wages.
The Gini index rose from 0.394 in 1970 to 0.482 in 2013. The top incomes switched from capital income to wage income, increasing revenue and inequity (Pulok et al., 2019). The 1986 Tax Reform Act reduced the maximum effective income tax rate and boosted income money. The stock market collapse of 2001 and again between 2007 and 2009 slowed the increase in income disparity because it reduced the value of stock options and capital profits. Earnings declines totaled 36.3% during the Great Recession of 2007-2009. That drop was the largest since the Great Depression. Recovery of median earnings across social strata, 2010–2020 (Kuhn et al., 2020). Income disparity grew, however, because recovery sped up at different rates for different people. Although most other established economies have more evenly distributed income than the United States and have not experienced as much of a rise in disparity as the United States has in recent decades, income inequality has grown in all of them.
How Globalization and New Technologies Contribute to Growing Inequality
The effects of globalization and developments in technology have been to exacerbate inequality in the United States. Since the 1970s, the country has witnessed an increase in inequality, which can be attributed to both the rapid progression of technology and globalization. As the capacity for automation grows, more and more tasks can be completed without human intervention. These systems are replacing workers in a variety of low-skilled positions that previously did routine tasks. However, modern technology enables businesses to eradicate mundane duties by outsourcing those tasks on their behalf.
Thus, seasoned workers can focus on non-routine tasks, which helps them develop and sets them apart. (Pulok et al., 2019). This lowers jobs for low-skilled or untalented workers, raising income inequities. This has expanded the wage gap between expert and casual workers and made capital more important to output. Even though improved technology makes goods cheaper, the unequal division of capital and the significant financial income it produces for those with higher wages add to disparity. Globalization has expanded the wage gap by importing goods from emerging nations and using unskilled labor to make products. Trade can boost GDP and profits and it could also raise poverty. Globalization forces states to work with foreign groups (Saez & Zucman, 2020). Several advantages come with globalization, including more convenient access to the cultures of other countries, a continuous relationship with those countries, cheaper products, and entry into new marketplaces. Globalization has given rise to several difficulties, including those associated with international recruitment and immigration, customs and export fees, and regulatory problems.
Wealth Inequality Versus Income Inequality
The degree to which a population’s revenue is unequally distributed across its members is called income inequality. Wealth inequality is the asymmetrical distribution of assets or the disparity in total wealth between various categories of people within a population. Inequalities in income and wealth share some commonalities but are also distinct. The issue is widespread and has multiple root causes in people’s lives at different levels of society. The wealth and revenue disparities between wealthy and less fortunate households continue to expand (Strauss, 2011).
The share of family income growth going to upper socioeconomic groups has increased while the share going to lower and middle socioeconomic classes has dropped. Asset inequality means more than pay inequality. Thus, asset disparity matters more than wage inequality. US income is concentrated in the hands of a few. In recent years, the richest fifth of families has made almost 200 times more than the lowest fifth. (Pulok et al., 2019). Wealth improves health, education, shelter, and transit, but capital is created from income.
Trends in Wealth Inequality in the U.S. from 1940-2020
Even though the economy has shown indications of improvement since the Great Recession, there are still symptoms of inequalities in the income and wealth of individuals. As stated earlier, the difference between wealthy and less well-off households has been noticeably widening (Horowitz, 2020). In the 1920s, due to a structural change in the economy, the middle class in the United States grew more prosperous thanks in part to the introduction of pensions and a rise in the proportion of people who owned their own houses. Although the share of family income possessed by the bottom 90% increased from 15% in the 1920s to 36% in the middle of the 1980s, it has been falling gradually since then (Mitchell, 2020).
After WWII ended, the speed of economic growth continued to accelerate. While there was some narrowing of the gap between the wealthy and the rest, the gap between the middle class and the poor did not close much during this age. This is a primary cause of the perpetuation of economic inequality. U.S. family incomes have risen steadily since the 1970s. The median family income increased significantly from 1970 to 2000.
If it were not for the two recessions that have hit the economy since the year 2000, family income would be rising more rapidly. Over the past two decades, there has been a clear slowdown in the rate of increase in family wages. It took until 2015 to get back to pre-recession amounts of household income, which had been struck particularly hard by the Great Recession that began in 2007. The typical wage has stayed the same for 15 years, which is the worst performance in the last half century. Household income has increased steadily every year since 2018.
Two Factors Contributing to America’s Wealth Gap
Despite the fact that there could be many causes of economic inequality, female inequality, and educational inequality stand out as two of the most crucial ones. Gender inequality is an issue that has persisted for as long as there have been women (Frank et al., 2019). Historically, women’s wages have been lower than men’s, and their access to finance and property ownership has been more limited. Female pay inequity hurts low-income and one-income families, especially racial families. Pay inequity affects most women, but low-income and single-income families are hardest hit. The gap between men’s and women’s salaries has barely altered over the past 15 years. The salary disparity between men and women reached 84% in 2020 (Frank et al., 2019). To put it another way, this means that a woman would have to work an extra 42 days, or about 1.5 months, to earn the same as a guy.
A shortage of schooling is a major factor in income gaps not just in the United States but globally. Multiple recent studies have shown that the gap in earnings between those with a college degree and those with only a high school diploma has widened significantly. Those who have not completed their official schooling are more likely to be low-income workers and part of socially marginalized groups (Mitchell, 2020). This harms their offspring because they cannot provide a collegiate education due to a lack of financial means.
Individuals’ income potential is constrained because they need more schooling to compete for higher-paying, specialist jobs. An individual’s earning potential increases in direct proportion to their schooling degree. As the powers of modern technology increase, so do the educational requirements for prospective workers. Although it would benefit the majority of the people, the widening wealth gap prevents many from affording it.
The Role of Healthcare Inequality
Health inequalities are the disparities in health and access to medical treatment that exist between different social divisions in a community. A wide range of societal variables causes inequality in access to medical treatment. Besides, it encompasses factors such as education level, wealth, employment opportunities, gender, and nationality (Trapeznikova, 2019). When one group of people’s socioeconomic situation is significantly worse than that of another group, there is inequality in healthcare. Because of the unequal distribution of accessible healthcare resources among different socioeconomic groups across the globe, many individuals and organizations have restricted access to medical treatment.
The U.S. has the world’s most uneven medical care system because it is the only nation to rely on private health insurance. (Pulok et al., 2019). If their health insurance choices are affordable, those with jobs that offer health insurance have access to better medical care. Smaller companies are less likely to give health insurance, and when they do, the quality is often poor. Unfair medical care allocation raises medical costs.
Emergency rooms are often the only option for uninsured patients. These people are more likely to die because they cannot get prophylactic or curative therapy. (Trapeznikova, 2019). Low-income families have trouble affording doctors, clinics, and other treatments. The majority of those with low earnings do not have optimum health as a result. Despite the rising healthcare expense, wealthy people can still visit the best physicians and pay for cutting-edge therapies. Homes with greater levels of wealth and money typically have residents who are in better shape.
Wealth Gap between the Insured and the Uninsured
Difference in access to private insurance coverage contributes to wealth and income inequality. Ultimately, this widens the wealth gap between people who have access to insurance and those who do not. People who do not have insurance typically have much less capital and much smaller earnings than those who do have insurance. Even though they stand to benefit the most from having insurance, the households with the least income have the least coverage available. When an individual has health insurance, they are required to make payments toward their insurance coverage. People with higher incomes are able to pay higher premiums than those with lower incomes because they can afford it.
The majority of families living on a poor salary will select minimal or fundamental insurance. Ultimately, the insurance company will not pay out because of the costs that the insured person is responsible for spending out of pocket in addition to any deductibles (Mendez-Carbajo, 2022). These people have the propensity to pay for a policy that does not benefit them, contributing to an even greater disparity in wealth. Families with more financial resources can pay for their insurance payments and other essentials and the large deductible that comes standard with their coverage. On the other hand, the lower the deductible and the higher the payment, the smaller the out-of-pocket expenses will be before the insurance kicks in. The disparity between those who are covered and those who do not have health coverage will continue to expand as medical treatment expenses continue to rise and as economic inequality worsens.
Increasing Access to Low-Cost or Free Healthcare as a Means of Reducing Income and Wealth Inequalities
Healthcare reform has the potential to reduce revenue and capital disparities. Programs that provide free or low-cost healthcare to those in need should be implemented to lessen economic disparity (Light, 2020). These families had the financial resources to pay for preventative care, medicine, and acute and chronic medical treatment. In most instances, these costs place additional stress on already struggling low- and middle-income families. Low- and middle-income families profit from free or low-cost healthcare programs like the Affordable Care Act (ACA), Medicaid, and Medicare, contributing to a more level playing field regarding revenue and wealth (Strauss, 2011). The Affordable Care Act has many benefits, but higher taxes has led some firms to stop giving insurance to their workers. Because enrollment time is brief and healthcare practitioners are scarce, premiums are high, making it hard to find suitable insurance coverage.
A Recommendation for Reducing Income or Wealth Inequality
As a result of inequality, an increasing number of people in the United States are finding themselves without a house or starving. This trend is expected to continue—policymakers at the government level research to determine the variables contributing to the widening income and wealth gaps. One of the many strategies that can be utilized to reduce inequality is to rework the earned income tax credit. There are many other strategies available. The earned income tax credit is only available to low-income families that have children; however, this program may be reorganized so that it is also available to low-income families that do not have children. If the parameters of the tax benefit were expanded, it might be feasible to reduce income disparities and make living expenses more reasonable for everyone.
There are parallels to be drawn between the Universal Basic Income (UBI) and the earned income tax benefit. This scheme would give each adult citizen a monthly payout of a set sum to help with basic living expenses. If limited to low-income families, the scheme would cost as much as the earned income tax credit. Without food aid, everyone would have an unlimited wage. These funds could be redistributed to provide families with the resources they need and reduce government waste.
I believe that the saying “the solution to poverty is to abolish it,” will work best. This will reduce the income gap between rich and poor, raise living standards, and reduce the number of families living in poverty. I know there will be scammers, but every program has pros and cons. Wealth and salary inequality will rise if nothing is done. Thus, the government’s intervention to create a more equitable policy is crucial.
Conclusion
In conclusion, the problem of wealth and income inequality is complicated and multi-faceted, with a wide variety of communal and individual variables contributing to its development. This paper addressed how globalization and technological advancements have exacerbated wage and wealth disparity in the United States, as well as the various methods for measuring these disparities that are presently accessible. It has also been examined how uneven access to healthcare impacts wages and the division of wealth in the country, in addition to two case studies of wealth disparities in the country.
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