Income Inequality in the United States

The rich get richer, goes the traditional saying, and the poor get poorer. This saying embodies two implicit economic assumptions. One is that the social community as a whole -- the macroeconomic world -- is characterized by income inequality, an inequality so sharp that society is divided into two groups, the rich and the poor. The other is that in the usual course of events, this income inequality tends to widen, with the gulf between rich and poor becoming ever more sharply stratified.

The saying that the rich get richer and the poor get poorer is of uncertain age and origin. It certainly goes far back in time, and indeed it is surely rooted, as we will see, in the experience of traditional agrarian village life in the pre-industrial age. Yet it is a saying that has popular relevance in the entirely different economic world of the contemporary United States.

A widespread populist sense exists today that income inequality in the United States is widening, and sharply. Certainly the very rich are more prominent than a generation ago; in the 1960s and 1970s the richest Americans were nearly invisible to the public eye, but in the 1990s, who hasn't heard of Bill Gates? At a slightly lower level, the multimillion dollar contracts of sports and film stars are as much discussed as their exploits on court or screen. In general, a "star system" has contributed markedly to a concentration of incomes

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ocial leveling, was accompanied by a political rhetoric that largely removed "class" from the American political lexicon (Collins, 1996, 26-27). This levelling trend in the postwar years can be attributed largely to very rapid economic growth: the average income roughly doubled between 1950 and 1973. With the pie so rapidly expanding, it was not difficult for everyone to get a larger share. However, overall economic expansion is not a sufficient condition. During the stagnation of the 1970s and early 1980s, the distribution of growth became more unequal, with the poorest fifth of Americans getting markedly poorer, the next fifth losing some ground, the next two fifths more or less holding their own, and the wealthiest fifth gaining sharply (Braun, 1991, 185). Indications are that the greater inequality that arose during the stagnation period has persisted if not further increased in the more recent period of renewed growth (Collins, 1996, 22). Now, all such statistics are subject to manipulation, and are also full of misleading components. For example, college students as a group are relatively poor, eating pizza and living with roommates in rented houses, even though they may come from upper-middle-class backgrounds and hav

Category: Economics - I