Income and wealth inequality

This paper explores the relationship between income and wealth inequality. It starts by providing a brief overview of the recent trends in income and wealth inequality in the United States. It then looks at the different approaches that have been used to measure income and wealth inequality. Finally, it discusses some of the policy implications of these findings.

The United States has experienced a significant increase in income and wealth inequality over the past few decades. In 1979, the top 1% of households earned about 8% of all incomes, while in 2007 they earned about 23%.1 The share of total household wealth owned by the top 1% increased from 29% in 1979 to 34% in 2007.2

There are several different ways to measure income and wealth inequality. The most common approach is to look at the distribution of income or wealth across households. This can be done using the Gini coefficient, which measures the extent to which the distribution of income or wealth is unequal.3 Another approach is to measure the share of income or wealth going to different percentiles of the population. For example, the top 1% of households might be defined as those with incomes above $250,000.

Globalization and advances in technology have played a role in widening income inequality in the United States.4 Globalization has led to increased competition for jobs, while advances in technology have automated many tasks that were previously performed by workers. These trends have disproportionately benefited higher-skilled workers and contributed to rising income inequality.

Wealth inequality is even more extreme than income inequality. The top 1% of households owned about 42% of all wealth in 2012, while the bottom 50% owned just 1%.5 This is largely due to the fact that wealthier households own a disproportionately large share of assets such as stocks, bonds, and real estate.

There are several reasons for the increase in wealth inequality. One is that the returns to capital have been much higher than the returns to labor in recent decades.6 Another is that many of the wealthiest households inherit their wealth from previous generations.7

Healthcare inequality is a significant contributor to overall income and wealth inequality.8 In the United States, healthcare costs are often much higher for lower-income households than for higher-income households. This is because lower-income households are less likely to have employer-sponsored health insurance and more likely to rely on government programs like Medicaid. As a result, they often have to pay more out of pocket for healthcare costs.

Income and wealth inequality can have a number of negative consequences.9 For one, it can lead to increased economic insecurity for lower-income households. This is because they often have less saved up for retirement and are more likely to experience job loss or other financial shocks. Additionally, income and wealth inequality can contribute to social and political instability. When there is a large gap between the haves and the have-nots, it can lead to resentment and conflict.