The Income and Wealth Inequality final paper

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The Income and Wealth Inequality final paper
Introduction
Inequalities exist everywhere in the world, however, societies often put extra effort to reduce any form of inequality among people. According to Furchtgott-Roth (2021), inequality is one of the main drivers of social tension everywhere. Reducing inequalities and ensuring that everyone moves forward is an integral strategy to achieving sustainable development goals. Most communities or societies are economically dominated by some small elites. Only 1% or less of the community can dominate about 50% or more of all resources. There are so many inequalities in American societies. These inequalities include income inequality, wealth inequality, wage inequality, education, homelessness, and others. High and rising income inequality in the United States have recently been a concern. Is American is regarded in some way as two different counties economically, segregated by educational achievements (Strauss, 2017)? Income and wealth inequality in the United States is substantially higher than in almost any other developed nation, and it is on the rise, sparking an intensifying national debate. In that regard, the purpose of this paper is to provide an in-depth discussion of economic inequalities in the United States.
Describe how a country can measure its income inequality
Poverty levels are often subjectively based on the overall income levels of the country. Basically, a government measures its country’s level of poverty based on the percentage of the median income (Furchtgott-Roth, 2021). However, income inequality is associated with the distribution of that income in terms of what group receives the least or the most income. It entails comparing people with high incomes, middle incomes, and low incomes. Therefore, measuring income inequality means dividing the population into various groups and then comparing the groups, which can be carried out in several ways.
One most common way of measuring income inequality is by ranking all households by income from the lowest to the highest then dividing all the households into five groups with an equal number of people, also called quintiles. This kind of calculation allows researchers to measure the distribution of income among the five groups compared to the total (Furchtgott-Roth, 2021). Normally, the first quintile is the lowest fifth or 20%, the second quintile is the next lowest, and so on. The income inequality is measured by comparing what share of the total each quintile earns. The data can be presented by drawing a bar that shows the share of income for each fifth of the income distribution (Furchtgott-Roth, 2021). The Lorenz curve is a good example of a bar that graphs the cumulative shares of income received by everyone up to a certain quintile.
Evaluate the trend in the measure of income inequality for the United States from 1940–2020
Income includes revenues arising from wages, salaries, dividends from the share of stock, interests on saving accounts, rent, and profits made from selling products or services. Unlike wealth, income statistics do not cover the values of homes, stock, or any other possession (Horowitz et al., 2020). Therefore, income inequality is the extent to which income is distributed unevenly in a population. Income disparities are so pronounced that America’s top 10 percent now average more than nine times as much income as the bottom 90 percent. About 10 years after the end of the great recession in 2009, the American economy is doing well in several areas (Horowitz et al., 2020). The unemployment rate in 2019 was 3.5%, which is the best level since the 1960s. The U.S economy has also reflected the significant gain in jobs, which have rebounded in recent years. However, not all economic indicators are promising.
Household incomes have improved modestly in the 21st century and household wealth has not returned to its pre-recession level. Despite economic interruptions, the American median household income in 2008 stood at $74,600 (Horowitz et al., 2020). This amount was 49% higher than the median income of the households in 1970 when the amount was $50,200. The shortfall in household income is seen from the year 2000, the first recession. 2007 marked the onset of the great recession and posed another challenge to household incomes. It lasted until 2015 for the incomes to restore to their levels in pre-recession (Horowitz et al., 2020). From 2015 to 2018, the median U.S. household income increased from $70,200 to $74,600, at an annual average rate of 2.1%. This number is greater than the average rate of growth from 1970 to 2000.
In the United States, upper-income households have experienced rapid growth in income in recent years. however, American middle-income households are experiencing a reduction in income. Therefore, the greater share of the American aggregate share income is now shifting to upper-income households. According to Horowitz et al. (2020), the share of the US middle-income households has declined from 61% in 1971 to 51% in 2019. However, from 1971 to 2019, the share of the upper-income tier has increased from 14% to 20% respectively. Additionally, the share of the lower-income households has increased by 43% $20,000 in 1970 to $28,700 in 2018.

Evaluate the roles of globalization and advances in technology as causes of widening income inequality in the United States
There are several contributing factors to the widening income inequality in the United States, globalization and technological advances are some of them. These two are key factors that drive innovation, productivity, and economic growth (UNESCAP, n.d.). They are also important factors related to the rise in inequalities witnessed in the United States and across the globe (UNESCAP, n.d.). Technological advances lead to digitalization, the rise of robots, and artificial intelligence, which in turn favors capitalism and high-level skills at the expense of ordinary workers.
Technology has created stronger monopolistic markets for new goods and services. Globalization has expanded the scale of these winner takes all markets allowing vast profits and salaries to be shared among a narrow range of employees and shareholders (UNESCAP, n.d.). Additionally, technological change leads to fewer secretaries, typists, or assembly line workers causing income inequalities in different groups in society. Conversely, newer technology can increase the demand for certain high-end services or skills, such as engineers who can service those machines.
Compare wealth inequality to income inequality
Personal wealth means a stock of valuable possessions. It entails anything from cash the person has through shared and bonds to the value of the house and the car the person possesses. On the other side, income is a flow of money one receives, such as wages and salaries for employment (Macquarie, 2021). Income inequality is how unevenly income is distributed throughout a population. On the other hand, wealth inequality is an uneven distribution of wealth. Wealth inequality is often much severe than income inequality.
Explain trends in wealth inequality in the United States from 1940–2020
Apart from income, wealth is another indicator of financial security. Wealth is the value of assets that a family holds, such as a home or saving accounts without outstanding debts such as student loans or mortgages (Horowitz et al., 2020). The period ranging between the mid-1990s and 2000s was beneficial in terms of wealth gain for many Americans. Housing prices more than doubled in this period, and stock values tripled (Horowitz et al., 2020). As a result, the median net worth of American families increased from $94,700 in 1995 to $146,600 in 2007, an increase of 55%.
The wealth gap between the upper-income families and the middle and lower-income families is sharp and growing more rapidly than the income gap. Between 1983 and 2001, American families experienced a prosperous period. The middle-income families had their median wealth increased from $12,3oo in 1983 to $20,600 in 2001, indicating a 67% increment (Horowitz et al., 2020). However, the upper-income families had much more gains than lower and middle-income families. The upper-income family’s median wealth rose by 85% over the same period, from $344,100 in 1983 to $636,000 in 2001.
The united states have seen a widening gap between the upper income, the middle income, and the lower-income families. Between 2001 and 2016, only the upper-income tier experienced increased wealth, adding about 33% at the median. On the other hand, middle-income families saw their median net worth shrink by 20% and lower-income families experienced a loss of 45% (Horowitz et al., 2020). In 2016, the upper-income tier had 7.4 times as much wealth as middle-income families and 75 times as much wealth as lower-income families. In 1980, the 90/10 ratio in the U.S. was 9.1, meaning that the upper-income households had incomes about nine times the incomes of the lower-income households at the bottom (Horowitz et al., 2020). The ratio increased in every decade since 1980, reaching 12.6 in 2018, an increase of 39%.
Evaluate two causes of wealth inequality in the United States
The two among many causes of wealth inequalities in the US include technological advances and globalization. Technological advances have significantly favored high skilled employees while being a disadvantage to ordinary employees (Strauss, 2017). It eliminates what is called middle-skilled jobs. For example, computer software and industrial machines eliminate jobs related to clerical tasks and routine manufacturing that once provided income to middle-income families (Strauss, 2017). Technology has contributed to a third of wealth and income inequalities in the US between the 90th and the 10th percentile earners over the last 25 years.
Globalization is another cause of wealth inequality in the US. Competition from growing economies like china alongside reduced trade barriers has further reduced prospects for the US workers without advanced skills (Strauss, 2017). These issues have reduced income in the areas such as furniture, textile, and leather goods. Additionally, financial globalization has contributed to inequality. The concentration of foreign assets and liabilities in relatively higher skill- and technology-intensive sectors pushes up the demand for and wages of higher-skilled workers.
Evaluate the role of healthcare inequality as it relates to income and wealth inequality
Wealth and income of families are common determinants of healthcare inequality in the United States. People who have more wealth or household income can access better healthcare services as well as timely healthcare services than individuals with low income. Those with low income may not afford costly healthcare services making them inaccessible to healthcare (Chan, 2019). According to the American Psychological Association, U.S. households with annual incomes below $50,000 report higher levels of stress than other families. While high-income and wealthy people can afford preventive care, low-income and poor people only seek medical attention when the disease has become severe due to financial constraints (Chan, 2019). Therefore, high-income and wealthy people have better health and wellbeing than poor and low-income individuals.
Estimate the wealth gap between those who have access to private insurance and those who do not
There is a wide wealth gap between those who have access to private insurance and those who do not. Public health insurance is more affordable than private ones. Public insurance normally requires no co-pays or deductibles and has lower administrative costs than private health insurance (Chan, 2019). On the other hand, private insurance plans often have higher prices than public ones. Based on the price differences, people who access private insurance are those who can pay high premiums. The associated out-of-pocket cost in private insurance is high. Public health insurance is insurance that is subsidized or paid for entirely by public (government) funds (Chan, 2019). Private health insurance is paid for in part or entirely by the individuals being covered.

Evaluate whether increasing access to affordable or free healthcare can reduce income or wealth inequality
Reducing wealth or income inequality can reduce healthcare inequality. Additionally, increasing access to affordable or free healthcare can reduce income or wealth inequality. The high cost of healthcare can contribute to poverty and low income, in one way or the other (Furchtgott-Roth, 2021). Wealth disparity can arise as a result of the high cost of healthcare, especially to individuals or families experiencing chronic illnesses. Diseases like cancer are expensive to treat and might drive people to poverty. Increasing access to healthcare would reduce excess money spent in healthcare, preventing families from getting into poverty. Additionally, it would reduce preventable disability and disease that may also contribute to wealth and income inequality (Furchtgott-Roth, 2021). Therefore, to some extent, access to affordable or free healthcare can reduce income or wealth inequality. Make one recommendation on how to reduce income or wealth inequality if you were a federal policymaker
One important recommendation is that the government should make employment more profitable for low-income workers. This can be done by increasing the minimum wage. Higher wages for the lowest-paid workers have the potential to help nearly 4.6 million people out of poverty and add approximately $2 billion to the nation’s overall real income (Furchtgott-Roth, 2021). Furthermore, increasing the minimum wage does not retard economic growth and also does not hurt employment. Therefore, it is one of the best recommendations.
Conclusion
The wealth and income inequality gap is widening among various groups of people in society. They are among the most significant drivers of social tension everywhere. Income and wealth inequality in the United States is substantially higher than in almost any other developed nation, and it is on the rise, sparking an intensifying national debate. Increasing the minimum wage is one of the best recommendations to reduce wealth and income inequality.
References
Chan, C. (2019). Differences between private and public insurance in the United States. https://www.pacificprime.com/blog/differences-between-private-and-public-insurance-in-the-united-states.html
Furchtgott-Roth, D. 2021. United States income, wealth, consumption, and inequality. Oxford: Oxford University Press.
Horowitz, J., Igielnik, R., & Kochhar, R. (2020). Trends in income and wealth inequality. https://www.pewresearch.org/social-trends/2020/01/09/trends-in-income-and-wealth-inequality/
Macquarie, R. (2021). What’s the difference between wealth inequality and income inequality, and why does it matter? https://positivemoney.org/author/robert-macquarie/page/3/
Strauss, S. (2017). The Connection Between Education, Income Inequality, and Unemployment. https://www.huffpost.com/author/steven-strauss
UNESCAP. (n.d.) Technology and Inequalities. https://www.unescap.org/sites/default/files/06Chapter4.pdf