The U.S. currently faces significant income inequality, as the top 20% of Americans control 74% of the nation’s income and 93% of the nation’s wealth. This huge income disparity has been coupled with falling social mobility, and the twin challenges have left the American Dream, once the hallmark of this country, as an illusion for many Americans.
I will examine the rise in income inequality since 1979 and evaluate some of the potential causes. The project will also compare the U.S. to other OECD nations data, and it is clear from preliminary results that that the U.S. has significantly more income disparity than other nations. Since all nations have faced similar market pressures, the difference in inequality suggests that market forces are not the only cause. Put differently, there is a role for public policy to reduce income inequality.
It is certainly fair to ask, however, whether governments should worry about income inequality—does it have any negative consequences? I will research the correlation between income inequality and poor education, sub-par health, increased crime, and reduced economic growth. If there is robust correlation, it would provide some support for government action to reduce inequality. I will also examine the extent to which income inequality stifles democracy, as wealthy campaign contributors and lobbyists have increased access to politicians and greater opportunities to shape legislation.
Despite the potential negative intrinsic effects of income inequality, with significant social mobility, low-income Americans would have the chance to escape poverty and its negative consequences. Unfortunately, as my research will show, upward mobility has been stagnating in the U.S., and many underserved Americans remain in the lowest income quintile and are unable to reach the middle class. The lack of opportunity is particularly troubling because the U.S. is the most immobile of all Western nations. The social inequality also creates a cycle of poverty, wherein, low-income children cannot escape their parents’ income quintile.
Because rising income inequality and falling social mobility are due in part to policy decisions, my research paper will end with a discussion of government’s role in reducing wealth disparities and expanding equity. The paper will enumerate policies such as investing in education, reforming the tax system to be more progressive, reducing urban poverty, correcting market failures, and ensuring wealthy interests do not dominate the policy discourse, that can ensure that equality of opportunity, a fair distribution of income, and a vibrant American Dream are realities.