Unequal Income Distribution In USA Essay Research

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Unequal Income Distribution In U.S.A. Essay, Research Paper Unequal Income Distribution in the U.S.A. In recent years, increasing inequality in the distribution of income has been a subject of considerable public concern, political attention, and academic research. Income inequality is a measure of how equally the income pie is divided among all members of society. The relative income, or gauge, can be defined how well the poor are doing economically compared to the rich. In other words inequality is a measure of how equally the income pie is divided among all members of society. According to Paul Ryscavage in Income Inequality in America, income is influenced by several social, economic, and demographic factors. Occupation, industry of employment and source of income

represent the economic factors. The main social factors are household composition, education level, and education quality. Finally, age, sex, and race compose the demographic factors (15). Socio-economic diversity can be a clean representation of how well income is distributed among social groups. In an ideal society the majority of households should have incomes above the cost of basic needs to create a well-balanced economy. Therefore, the foundation of economic success is based largely on this distribution providing a strong middle class that can support the economy and no extreme income gap between rich and poor guarantees economic stability. On the other hand inequitable income distribution may not only lead to economic problems, but also social problems. In Created Unequal,

Peter Galbraith believes that income distribution analysis shows that the gap widens more and more between social groups and creates problems (3). These problems can damage the developing process of a society, thus finding solutions to create a well-balanced income distribution is essential for present governments. Through the historical review of the background of the issue of income distribution one can present possible solutions to help maintain good economic development and stable society. The solutions presented are the reform of welfare system, progressive taxation and an increase in minimal wages. John Borland points out in ?Fear of Falling? that the income gap has been steadily increasing since the postwar era. Currently the income inequality is at its highest level ever

(1). US Bureau of Census indicates that an increase of 4.7 % of the total income allocated at the top 5 %, while the lowest quintile had a decrease of 1.2% of the total income held between 1970 and 1996 (473). Fig 1. U.S. Distribution of Income in 1997; rpt. in Rector and Hederman (2). It is evident from the above graph that the most current data shows that top quintile holds 49.4% of the total income in the U.S.A. while the bottom quintile holds only 3.6%. The graph is somewhat misleading because the bottom and the top quintiles do not really represent the 20% of the population. Through research Rector and Hederman in ?Income Inequality: How Census Data Misrepresent income distribution? state that ?Indeed, in reality the top Census ?quintile? contains not 20 percent of the

population but 24.3 percent, while the bottom quintile contains only 14.8 percent of the population? (4-5). The historical overview of income distribution from 1945 until today could be divided into three distinct periods: 1945-73, 1973-81, and 1981-89. The first period represents what is called the ?good years?, the great postwar boom generations. This period, from 1945-73 shows what real, broad-based prosperity looks like. One of the main reasons why income distribution decently increased for middle class during this period was the reconstruction of US after WW II, and rapid and constant economical growth. The employment rate reached peak during this period, where well educated people, high school and up, were earning very good wages. The government was keeping interest rates