U.S. Income Inequality

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Updated: Mar 28, 2022
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Throughout the history of capitalism, income inequalities between the upper and lower classes have caused many debates even revolutions in Russia, France, China, and others. The mass workers are subjected to the dominant ideology of elites, so the top ten percent earn a large amount of money while the lower class barely survives. The middle class came about which filled some of the disparity in income between the two classes. However, the middle-class today is losing some ground as job opportunities go overseas, and the requirement of college degrees for jobs increases.

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In today’s society, education and a person’s social and economic background greatly influences his or her income. Income inequality also varies among different ethnic groups especially among Asians who have a one to ten ratio between the lower and upper classes. Also, female workers sometimes face lower incomes compared to male workers of the same position because of discrimination or a glass ceiling at work. In addition, the federal tax system to some people is a way to increase the income inequality among Americans, and Democrats and Republicans greatly vary in their views about the fairness of the tax system. Income inequality occurs in many societies, so it is an important to explore and find the reasons why it happens in different groups.

The American middle class is stable in size, but losing ground financially to upper-income families

[image: Share of adults living in middle-income households is unchanged since 2011]


According to the graph, the middle class is decreasing in size, while the upper and lower classes are increasing in size. In only forty-five years, the middle class has decreased by ten percent; however, the lower and upper classes grew four to five percent of the total adults in the workforce. Today, the middle class faces many issues that have caused its loss of size: disappearing opportunities for those with little education, global competition and rapid advance in technology, growing dependence on the temporary workforce, and the rise of growth industries and nonunion workplaces. Many middle-class jobs today require bachelor’s or higher degrees which limits the jobs available to those without college degrees. At the same time, companies send job opportunities overseas since foreign labors are much cheaper. Also, short term seasonal jobs do not have any retirement or health benefits, putting works with little financial security. Last of all, the fast-food industry is growing like never before; however, workers only earn minimal or low-level wages, which increases the number of people in the lower class. From the graph, the top class becomes richer as the lower class becomes poorer, reducing the middle class. One possible explanation is that the upper-middle class’ social network allows them to find higher level jobs since they have connections with CEOs and business owners. Their life chances, opportunities to provide material goods for themselves, are much higher than the lower class because they have successful families to support them in terms of money and education. On the other hand, people in the lower class may get trapped in their low-income status and not break free from their cycle of problems: the lack of education and financial security that passes on to the next generation. This chart shows the disparity between the upper and lower classes while the middle class loses ground.

For most U.S. worker, real wages have barely budged in decades

[image: Americans’ paychecks are bigger than 40 years ago, but their purchasing power has hardly budged]


Another issue that the working class face today is that their average hourly pay adjusted for inflation has barely increased after fifty-four years. The value of their hourly pay in 1964 is about the same compared to today which means that their average pay has increased while the buying powering of their income has not changed. For example, the amount of grocery a person could buy with two dollars and fifty cents in 1964 is the same amount a person could buy for about twenty dollars in 2018. If adjusted for inflation, wages only changed about two dollars. The value of U.S. workers’ hourly pay has hardly changed much over the years, but the top ten percentile’s income has significantly increased over the years. According to the conflict theory, few possible reasons for this inequality is that the rich elites control the economy and strongly influences the government, limiting the reforms to help the poor, and stratification separates the social classes and allows the rich to dominate over the poor. The rich becomes richer, while U.S. workers’ hourly pay stays the same. In contrast to the children of the lower class, the children of the top ten percent have a much greater chance of higher education which likely results in high paying jobs. Unfortunately, income inequality is not decreasing but expanding. Companies are not willing to increase their workers’ pay except to compensate for inflation that causes the gap between the upper and lower classes. To conclude, this graph generally shows the lack of wage increase of U.S. workers over the years since their wages’ actual buying power has barely increased over the years.

Key findings on the rise in income inequality within America’s racial and ethnic groups

[image: https://assets.pewresearch.org/wp-content/uploads/sites/3/2018/07/06152441/PSDT.07.12_economic_inequality-00-00-.png]


Although income inequality is increasing between social classes, some ethnic groups in America have greater income inequalities compared to others. As seen from the graph, the income difference between the upper and lower classes of Asians has grown significantly, but the income inequalities for other ethnic groups did not change as much. For Asian Americans during the 1970s, the upper class earned only six times more than the bottom ten did, while in 2016, the difference grew to 10.7 times more. The income inequality between the upper and lower classes for Asian Americans was the least in 1970 compared to other ethnic groups; however, the income disparity among Asian Americans has recently increased to a point higher than all other ethnic groups. They went from the least to the greatest with respect to income inequality. The top ten percent of Asian Americans earn about one hundred and thirty thousand dollars, while the bottom ten percent of Asians Americans only earn about twelve thousand dollars a year. Few possible explanations to this are that some Asians who immigrated over to the United States also brought their social status and wealth or came here for higher education. According to Max Weber, some Asian Americans might have greater life chances, the opportunities to gain material wealth. First, they might have business ties with their mother country which gives them opportunities to increase their wealth faster. Another possibility is that some Asian Americans have achieved a higher status through education which usually results in upper-levels incomes. On the other hand, the Asian Americans in the bottom ten percent might have come over through America’s generous immigration policy, but they might not have established a business or came from a good economic background. They get stuck in the bottom quintile and rely on social welfare. In the end, this graph represents the huge disparity in income between the upper and lower-class Asian Americans, and this may have been influenced by multiple factors like education, social background, and business connections.

The narrowing, but persistent, gender gap in pay

[image: The gender pay gap is narrower among young adults than among workers overall]


In addition to the income inequalities in different ethnic groups, women overall usually get paid lower than men in their particular field. According to the graph, female workers only receive eighty-five percent of what men get paid, while women ages twenty-five to thirty-six have a higher percentage of what men earn: eighty-nine percent. If a guy earned one-hundred thousand dollars at a corporation, a female worker in the same position might only earn eighty-five to eighty-nine thousand dollars. These graphs take into account all full time and part-time employees. In 2010, female workers ages twenty-five to thirty-six almost earned the same amount as men. This income inequality between men and women has decreased over the years, but their difference has not been resolved. Few key issues in the past were the level of education of women and their roles in the family. Ladies usually did not have college degrees and took care of the house. Recently, women have entered the workforce, and the income gap is closing because of their gain in educational levels. Higher education tends to increase opportunities to upper-level jobs; however, at some businesses, there is an invisible barrier called glass ceiling that still prevents the promotion of certain people because of their gender or race. Discrimination occurs at a company when a manager denies a promotion because of that person’s ascribed status. Some workers do not have a good work ethic which might result in lower pay, but women sometimes still find discrimination or a glass ceiling at work. The graph shows that female workers’ incomes still lag behind male workers, but income inequality is improving as time goes on.

Growing Partisan Divide Over Fairness of the Nation’s Tax System

[image: Widest partisan gap in views of fairness of tax system in at least two decades]


Last of all, the views of the federal tax system greatly vary among political party members. This graph shows the significant polarization of the two parties’ position on the tax system. Republicans usually feel that the tax system is fair, while Democrats find the tax system as unfair. Overall, fifty-two percent of the Americans surveyed think that the tax system is unfair, and forty-six percent of the them feel that it is fair. However, in 2019, the number of Republicans that think the tax system is fair shot up to sixty-four percent, while the percentage of Democrats who thought the system is fair dropped to thirty-two percent. Some Americans might feel that corporations or the upper class are not paying enough taxes or that heavily taxing the rich is a way to redistribute wealth. Democrats tend to view the tax system as favoring the top quintile and putting the weight of taxes on the poor or middle class. Republicans, on the other hand, prefer the current tax laws since they may benefit from the tax cuts. From the conflict perspective, the tax system today increases the disparity between incomes because the rich uses their power to influence tax laws which in turn will help lower their taxes. The federal tax system becomes a conflict between the rich and the poor as each class’ net income depends on how much they are taxed. A possible reason is that more low-income families are Democrats while higher income classes are Republicans. However, more research is needed to see why Democrats and Republicans vary in their views about the tax system. To conclude, this graph shows the sharp difference between Democrats and Republicans’ views of the tax system which may depend on their family background and income.

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U.S. Income Inequality. (2020, Feb 14). Retrieved from https://papersowl.com/examples/u-s-income-inequality/