The Impact of Wealth and Income Inequality to the American Society

The Impact of Wealth and Income Inequality to the American Society

Introduction and Background

In the last decade, 2010-2020, the level of income and wealth inequality in United States has increased significantly due to factors such as unemployment, low economic productivity, and reduced household income based on the low salaries and wages. From a socio-economic standpoint, wealth (or net-worth) in the family or personal context refers to value of assets attached (owned) to an individual or family (Hailemariam et al., 2021). It may include assets such as a savings account or a family home- thus, net wealth excludes any outstanding debts, personal loans, and mortgages (Akee et al., 2019). One of the key advantages of wealth is that once it is accumulated over a long-term period it establishes a source of personal or retirement income (Auten & Splinter, 2018). Therefore, wealth helps to cushion against short-term economic turbulences hence providing financial security and protecting the socio-economic status of an individual or family.

The matter of wealth inequality in the United States emerges from the disparities (variations) in the access to tools or instruments that build wealth such as employment income or business proceeds. Thus, wealth disparities create economic inequality hence widening the gap between the rich (high earners) and the poor (low earners) (Hailemariam et al., 2020). Statistics from the U.S Census Bureau in 2019 indicate that the top-20 highly wealthy individuals in the United States owned 85.59 % of the national (country’s) wealth (Hailemariam et al., 2021). Thus, demonstrating the ever-growing gap between the rich (wealthy) and the poor.

On the other hand, income from a socio-economic perspective refers to the value (money) that individuals or families receive from employers or enterprises after the delivery of labor services or sale of products. Incomes include; earnings from salaries-and-wages and proceeds from property sales and investments (Auten & Splinter, 2018). The concept of income inequality in the United States arises from the element of income distribution variations based on parameters such as geographical position, ethnic background, racial heritage, and occupational type or status (Auten & Splinter, 2018).

In the United States, some of the major causes of inequality income for families (households) and individuals include elements such as changes in technology use, inefficiency in lobbying efforts by trade unions, globalization, and significant erosion in value of the minimum wage rate (Manduca, 2018). Income inequality in the United States adversely affects the access to services and amenities such as housing, education, healthcare, and food hence directly influencing the standard (quality) of life (Hailemariam et al., 2021). Statistics from the U.S Department of Labor-Statistics in 2021 indicate that 20% of the top income-earners in the U.S took home more than half (or 50%) of the total incomes; thus, illustrating the glaring gap between the rich (high-income households) and the poor (low-income households) (Hailemariam et al., 2021). A review of the impact (effect) of wealth-and-income inequality on the U.S Society forms the foundation of the discussion.

The Positive Impact of Wealth and Income Inequality on the U.S Society

Promotion of Economic Growth

A deep correlation exists between high rates of wealth and income inequality and increasing rates of economic growth. In this regard, the wide gap between the wealthy or high-income households (rich) and the underprivileged or low-income (poor) households in the Unites States could be a blessing-in-disguise (Akee et al., 2019). For instance, during the period prior to 2007- just before the great economic recession- the United States recorded a high rate of economic growth while the level of income inequality was considerably high (Hailemariam et al., 2020). However, during the period of the economic depression, 2007-2009, the American economy performed unfavorably (poorly) while the income-and-wealth inequality rates decreased significantly (Hailemariam et al., 2020). Economists and social scientists have shared their professional viewpoints on the unique correlation between economic performance and economic inequality.

One of the arguments presented in this regard submits that when the rates of economic inequality (resulting from wealth and income disparities) are high, the government and relevant stakeholders move swiftly to provide incentives that inspire entrepreneurship and innovation (Manduca, 2018). Thus, the underprivileged households or individuals- at the lower income levels- invest their energies into launching new enterprises and developing novel products (Manduca, 2018). Hence, the level of economic growth increases due to the enhanced economic output resulting from expanded economic activities.

The Adverse (Negative) Impact of Wealth and Income Inequality on the U.S Society

Limitation of Economic Growth

A faction of researchers in the field of economics point out to the negative correlation that exists between economic growth (in the long-term) and wealth-and-income inequality (at a sustained period). A number of explanations have been put forward to unravel the growing trend of low economic output and increasing economic inequality levels. Indeed, high levels of wealth-and-income inequality leads to increased rates of poverty (Franks & Scherr, 2019). In this regard, poverty is linked to low standards of public health and high levels of crime; these factors burden the state of the economy since they have to be addressed (Hailemariam et al., 2020). For instance, the south-side of Chicago has lower-standards of medical care compared to other major cities due to the ever-rising income disparities among the citizens (Heinrich Mora et al., 2021). As such, with the seemingly rigid state of low-incomes and ever-rising food prices, the consideration and priority for the pro-growth developmental and economic projects by the state is ignored (Manduca, 2018). Thus, leading to low economic growth in the American economy.

Further, wealthy persons command disproportionate levels of political and economic power compared to the low-income individuals (Manduca, 2018). Hence, there is an increased likelihood for the development of ineffective tax-policies and models that are favorable to the wealthy persons while disadvantaging the economically-underprivileged citizens (Franks & Scherr, 2019). Therefore, the resulting income-distribution disparities between the wealthy and the poor lead to increased political instability that promotes the development of crime hence limiting capital investments.

Increasing Crime Rates

Research studies present findings on the positive and direct relationship between wealth-and-income inequality and increased rates of crime. Cities such as Chicago in the United States that record high levels of the disparities in wealth and income between the poor and rich persons have extreme levels of crime (Auten & Splinter, 2018). For instance, in the year 2021, records from the police-department in Chicago 2021 indicated that there were 3, 561 cases of gun related crime and violence, and a high number were recorded in the poverty-stricken neighborhoods (Heinrich Mora et al., 2021). Indeed, studies posit that economically disadvantaged members of the American society have a high propensity for experiencing feelings of resentment and hostility owing to their poor economic status (Akee et al., 2019). Therefore, these individuals may find solace through crime and indulge in criminal behavior as they attempt to transform their economic situation. Certainly, some people are willing to participate in criminal acts in the pursuit of gaining access to resources or in the illegal acquisition of assets through violent crime (Hailemariam et al., 2020). The illustrations help to demonstrate the adverse impact of wealth-and-income inequality on the causation and increase in criminal activities in the United States.

Rising Political Instability and Inequality

Unfair distribution of wealth in the American society has resulted to economic and political inequality based on the view that the fewer number of individuals operating the processes and operations in the government have an unfair opportunity to change and alter laws and government policies to suit their wealth-generation goals (Hailemariam et al., 2021). On the contrary, the economically-challenged persons who lack access to government power and authority continue to sink into deep financial and economic crisis resulting from the implementation of unfair fiscal and economic models or policies (Akee et al., 2019). As such, the different in access to political power causes the development of hostility as the economically-underprivileged people use illegal means such as crime to seek access to resources or by participating in riots and violent protests (Franks & Scherr, 2019). Therefore, the lack of adherence or obedience to the law as described by the relevant-state leads to the development of anarchy or lawlessness.

Conclusion and Personal Opinion

The review of the impact (effect) of wealth-and-income inequality on the U.S Society has been an effective foundation in the discussion. The concept of wealth inequality in the United States develops from the disparities (variations) in the access to instruments that build wealth such as employment-based income and business proceeds. Further, the agenda of income inequality in the United States arises from the element of variations in income distribution based on parameters such as geographical position, ethnic background, racial heritage, and occupational type or status.

Indeed, I hold the view that the consideration of economic inequality as an advantage based on the trend that the economic-growth increases due to the enhanced economic-output as unfounded since only a few scenarios have presented such outcome. On the contrary, I strongly feel that the disadvantage of economic inequality based on disparities in wealth and income is true since it leads to unfair economic policies that stifle (jeopardize) economic growth. Indeed, I feel that the argument for the adverse impact income-and wealth inequality is convincing and true based on the findings from the studies.

References

Akee, R., Jones, M. R., & Porter, S. R. (2019). Race matters: Income shares, income inequality, and income mobility for all US races. Demography, 56(3), 999-1021.

Auten, G., & Splinter, D. (2018). Income inequality in the United States: Using tax data to measure long-term trends. Washington, DC: Joint Committee on Taxation.

Franks, A. S., & Scherr, K. C. (2019). Economic issues are moral issues: The moral underpinnings of the desire to reduce wealth inequality. Social Psychological and           Personality cience, 10(4), 553-562.

Hailemariam, A., Awaworyi Churchill, S., Smyth, R., & Baako, K. T. (2021). Income inequality and housing prices in the very long‐run. Southern Economic Journal, 88(1), 295-321.

Hailemariam, A., Dzhumashev, R., & Shahbaz, M. (2020). Carbon emissions, income inequality and economic development. Empirical Economics, 59(3), 1139-1159.

Heinrich Mora, E., Heine, C., Jackson, J. J., West, G. B., Yang, V. C., & Kempes, C. P. (2021). Scaling of urban income inequality in the USA. Journal of the Royal Society Interface, 18(181), 20210223.

Manduca, R. (2018). Income inequality and the persistence of racial economic disparities. Sociological Science, 5, 182-205.