Economic inequality may be the most important domestic issue today. The earnings gap between the wealthy and the rest of us has expanded greatly for the past 30 years or so. A society becomes increasingly unstable as income disparity widens due to the many negative outcomes caused by financial distress. The economy as a whole also suffers because less money is available to the masses, a situation which ultimately affects the wealthy in a trickle-up effect, of sorts. Following the economic crash of 2008 indicators such as Wall Street investment gains and private sector employment increases have been positive but the rich have become richer while everyone else has not felt the benefits. History documents the negative consequences of deep and sustained economic inequality and it’s a frequent subject of Democratic Presidential Candidate Bernie Sanders who is articulating the necessity to take steps to close the gap.
Between 1940 and the late 1970’s income disparity was essentially kept in check. However, prior to the Great Depression of the 1930’s, leading up to the recession of the early 90’s and preceding the economic crash of 2008 economic inequality widened. It’s not a coincidence. In each case the rich, wanting to accumulate more wealth, put their money into speculative investments leading to economic bubbles which inevitably burst. Additionally, the middle income earners incurred an increasing amount of debt to buy needed products because they were getting an increasingly smaller piece of the economic pie while their wages stagnated. The economic crash of 2008 was followed by a recovery which was felt disproportionately. The bottom 99 percent of income earners saw just five percent of the gains during the years 2010 through 2013. According to the Federal Reserve the bottom half of earners held just one percent of the nation’s wealth while the top five percent held 63 percent.
Economic inequality is influenced by several factors including cutting tax rates for the wealthy, the exportation of jobs and tax avoidance by corporations, anti-union laws, emergence of the tech and financial sectors and college costs. After these factors widen the gap, income inequality perpetuates itself. The wealthy spend a much smaller percent of their income than the rest of us who have no choice but to spend all or almost all income on necessary items. The upper five percent save and invest their money which further concentrates the nation’s wealth. Some contend that inequality can be a positive by encouraging people to take risks and create wealth for themselves. It has also been noted that the rich lost more during the economic crashes and inequality was briefly reduced. (Deprez, 2016).
Economic inequality is not simply a dollars issue. The short and long-term affects on the majority of society can be detrimental, making life much more stressful than is necessary. Financial problems, increased instances of mental and physical illness, lower academic achievement along with higher drug use and pregnancies among youths, increased divorce rates, bankruptcies and housing insecurity among many others. Countries with greater economic inequality have more crime. The U.S. has a larger earnings gap than Canada which is larger than Japan. “The homicide rate in the United States in 2009 was 50 per million population compared with 18 in Canada and 5 in Japan.” (Wilkinson, 2011)
History has shown us the way to lessen the economic gap. Stop subsidizing the wealthy and big corporations. The middle class was built when the rich paid a higher rate on their income and investments. Tighten regulations on dubious investments of financial institutions. Raise the minimum wage. Simple, doable and has been done before. Lessening the inequality gap lessens the financial stresses for millions and increases the economic outlook for everyone.
- Deprez, Esmé E. (2016). Income Inequality. Bloomberg. Retrieved from http://www.bloombergview.com/quicktake/income-inequality
- Wilkinson, Richard. (2011). Why inequality is bad for you — and everyone else. CNN Retrieved from http://www.cnn.com/2011/11/06/opinion/wilkinson-inequality-harm/
