Abstract

The level of income inequality in the United States today does not fit with our national vision of American as the “land of opportunity.” For many people, the American Dream, in the economic sense, is just a utopian idea from the past. Public policy to date has been unable to stop the trend of increasing inequality caused by low wages, unemployment, high health care costs, and an uneven playing field. The average income in the bottom 90% of the U.S. population was just $34,074 in 2015, while the other 10% had an average income of $312, 536. But it is the income of the top 0.1% that is astonishing at an average of $6,747, 439. Income inequality in the United States has been problematic since the nation’s beginning, but inequality today has risen to a level not seen since the Great Depression. Inequality is not just a problem for individuals and families; when carried to its full extremes it can result in a boom/bust cycle that ends in a general recession. The public policy solutions for inequality must incorporate methods of turning around the complex causes. Solutions can be categorized as redistribution of wealth, provision of basic needs, and improving access to economic growth. Current measures have had some success but must be increased and diversified.

Economic Inequality in the U.S.

The level of income inequality in the United States today does not fit with our national vision of American as the “land of opportunity.” For many people, the American Dream, in the economic sense, is just a utopian idea from the past. Public policy to date has been unable to stop the trend of increasing inequality caused by low wages, unemployment, high health care costs, and an uneven playing field. Solutions fall into three categories: redistribution of wealth via taxes and social programs, provision of basic needs, and access to economic growth (Salhotra, 2018). Public policy must begin changing immediately or the gap between rich and poor in the U.S. will continue to grow, perhaps to the point where the tide cannot be turned.

Evidence of Inequality

Figure 1 provides evidence of the income inequality present in the U.S. today.

Figure 1. U.S. average household income in 2015.

The average income at the bottom 90% of the U.S. population was just $34,074 in 2015, while the other 10% had an average income of $312, 536. But it is the income of the top 0.1% that is astonishing at an average of $6,747, 439. Figure 2 is even more striking. Although the growth in income for the top 1% has fluctuated much more widely than the relatively stable growth of the bottom 20%, it is the difference between the two that shows the extremes of inequality (Inequality.org, 2018). Another measure of inequality that is used to compare nations is the

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Figure 2. Growth in U.S. before-tax income. Top 1% vs bottom 20%.

Gini index, which quantifies the statistical dispersion of income or wealth (Pope, 2009). Since 1990, the U.S. Gini coefficient has risen from 0.43 to 0.48, revealing an increase in inequality (Statista.com, 2018).

Children are particularly vulnerable to economic extremes because they are dependent on others for their welfare and security. According to the National Center for Children in Poverty (2018), nearly 30 million American children – more than 40% — were living in or on the edge of poverty as defined by the federal government. One-sixth of these are children under three years of age. In 2016, the federal poverty threshold for a family of four with two children was $24,339. As a side note, this is only about $10,000 in difference than the average household income for the bottom 90% of Americans (NCCP, 2018). The statistics on inequality in America are appalling and a forceful illustration of why America is no longer the land of opportunity. Action must be taken to reverse this process, but first the causes of this inequality must be considered.

Causes of Inequality