Economic Inequality and....
- The Great Recession: A main cause of the 2008 recession was the unequal accumulation of debt in the United States, with a disproportionate amount of low-income households holding debt. Deregulation allowed more loans to be made to people with low credit scores, which led to an increase in foreclosures when those people couldn't repay the loans. This distribution of debt effectively magnified the foreclosure crisis.
- Supply and demand: As wealth is accumulated by fewer people, this takes purchasing power from more potential consumers, thus lowering demand for goods and services.
- Trickle-down economics: the economic-political theory that economic benefits, such as tax breaks, to the wealthy will inevitably benefit the poor.
- Gini coefficient: A measurement of the distribution of income or consumption within an economy. The Gini coefficient ranges from 0 to 1, where a country with wealth distributed equally has a coefficient of 0 and a country with perfect inequality has a coefficient of 1. The Gini index, used by the World Bank, operates on a scale of 0 to 100.
Factors behind economic inequality
Education Gap
- Standard and Poor’s suggests that the main reason for income inequality is a growing educational gap between the rich and poor. Jobs that require post-secondary education typically pay more than double that of jobs that require a high school diploma or less training. According to Standard and Poor's, jobs that required post-secondary training paid 3.5 times more than jobs requiring a high school diploma or less in 2010.
- The Economic Policy Institute says in its book the “State of Working America” that education is a critical component of economic mobility:
- “Among children who grew up in low-income families, those who failed to graduate college were almost three times more likely than their college-educated peers to still be in the bottom fifth as adults."
Income Gap
- According to Standard and Poor’s, the richest 10 percent of the global population makes nine times as much as the poorest 10 percent makes. In the U.S., the country's richest 10 percent makes 14 times as much as the bottom 10 percent.
- A 2011 Congressional Budget Office report showed that real net average household income grew by 62 percent between 1979 and 2007. Wages grew by 275 percent for the top 1 percent of earners though. Wages grew by just 65 percent for the next 19 percent of earners, about 40 percent for the next 60 percent of earners, and 18 percent for the bottom 20 percent. This means a disproportionately large amount of the increase in money made was made by society's top earners.
- When the CBO revisited the issue in 2013, it found that after-tax income increased 15.1 percent from 2009 to 2010 for the 1 percent, but grew by less than 1 percent for the bottom 90 percent of earners.
- Top earners are not just making more money than the lower classes, though. The lower classes are receiving less income to split amongst themselves because income is becoming more concentrated. In 1979 the bottom four classes earned 60 percent of total labor income, 33 percent from capital and gains, and 8 percent from capital gains. By 2007 the bottom four classes made less than 50 percent of labor income, 20 percent from capital and business and 5 percent from capital gains.
Wealth gap
- According to the U.S. Census Bureau, the wealth gap between the highest 20 percent of earners and lowest 20 percent of earners more than doubled between 2000 and 2011.
- In an August report the Census Bureau said, “Median net worth of households in the highest quintile was 39.8 times higher than the second lowest quintile in 2000, and it rose to 86.8 times higher in 2011.”
- Net worth of households in the top 20 percent also increased by $61,379 from 2000 to 2011 while net worth of households in the bottom 20 percent decreased by $5,124.
- Standard and Poor’s says that the Census Bureau’s data hides the fact that between between 2007 and 2010, the average U.S. Household lost 39.6 percent of its net wealth; or about 18 years' worth. This, Standard and Poor’s says, hampered the recovery from the Great Recession.
- Wealth specifically pertains to assets a household owns. These can can be cars, houses, stocks, bonds, retirement accounts, savings accounts, and luxury goods among others.