Causes of income inequality in the United States

This topic is subject to extensive ongoing research, media attention, and political interest.Income inequality in the United States grew significantly beginning in the early 1970s,[2][3][4] after several decades of stability.

[8][9][10] According to the Congressional Budget Office, "the precise reasons for the [recent] rapid growth in income at the top are not well understood", but "in all likelihood," an "interaction of multiple factors" was involved.

According to a June 2017 report from the non-partisan Bureau of Labor Statistics (BLS), productivity rose in tandem with employee compensation (a measure which includes wages as well as benefits such as health insurance) from the 1940s through the 1970s.

[22] BLS explained the decline in labor share as likely driven by three factors that vary by industry: Globalization refers to the integration of economies in terms of trade, information, and jobs.

Expertise and skill certified through an academic degree translates into increased scarcity of an individual's occupational qualification which in turn leads to greater economic rewards.

[43] In the resulting economic job market the income discrepancy between the working class and the professional with the higher academic degrees,[44] who possess scarce amounts of certified expertise, may be growing.

[29] Author Timothy Noah's "back-of-the-envelope" estimation based on "composite of my discussions with and reading of the various economists and political scientists" is that the "various failures" in America's education system are "responsible for 30%" of the post-1978 increase in inequality.

[62] Despite considerable progress in pursuing gender and racial equality, some social scientists like Richard Schaeffer attribute these discrepancies in income partly to continued discrimination.

[81] Writing in the Harvard Business Review in September 2014, William Lazonick blamed record corporate stock buybacks for reduced investment in the economy and a corresponding impact on prosperity and income inequality.

[49] Journalist Harold Meyerson wrote in 2014 that: "The purpose of the modern U.S. corporation is to reward large investors and top executives with income that once was spent on expansion, research, training and employees.

[86] According to journalist Timothy Noah, "you can't really demonstrate that U.S. tax policy had a large impact on the three-decade income inequality trend one way or the other.

A study by Thomas Piketty and Emmanuel Saez found that "large reductions in tax progressivity since the 1960s took place primarily during two periods: the Reagan presidency in the 1980s and the Bush administration in the early 2000s.

What we've achieved is a state too constrained to provide the public goods—investments in infrastructure, technology, and education—that would make for a vibrant economy and too weak to engage in the redistribution that is needed to create a fair society.

"[129] Still other researchers think it is the labor movement's loss of national political power to promote equalizing "government intervention and changes in private sector behavior" has had the greatest impact on inequality in the US.

[119][130] Sociologist Jake Rosenfeld of the University of Washington argues that labor unions were the primary institution fighting inequality in the United States and helped grow a multiethnic middle class, and their decline has resulted in diminishing prospects for U.S. workers and their families.

[134] Critics of technological change as an explanation for the "Great Divergence" of income levels in America[135] point to public policy and party politics, or "stuff the government did, or didn't do".

[96] They argue these have led to a trend of declining labor union membership rates and resulting diminishing political clout, decreased expenditure on social services, and less government redistribution.

Executives successfully eliminated any countervailing power or oversight of corporate managers (from private litigation, boards of directors and shareholders, the Securities and Exchange Commission or labor unions).

[166] This in turn has been reduced as traditional critics of excessive pay – such as politicians (where need for campaign contributions from the richest outweighs populist indignation), media (lauding business genius), unions (crushed) – are now silent.

[15] Journalist George Packer also sees the dramatic increase in inequality in America as a product of the change in attitude of the American elite, which (in his view) has been transitioning itself from pillars of society to a special interest group.

[168] Author Timothy Noah estimates that what he calls "Wall Street and corporate boards' pampering" of the highest earning 0.1% is "responsible for 30%" of the post-1978 increase in inequality.

[170] While immigration was found to have slightly depressed the wages of the least skilled and least educated American workers, it doesn't explain rising inequality among high school and college graduates.

[8][140][172][173][174][175] A September 2014 report by the Economic Policy Institute claims wage theft is also responsible for exacerbating income inequality: "Survey evidence suggests that wage theft is widespread and costs workers billions of dollars a year, a transfer from low-income employees to business owners that worsens income inequality, hurts workers and their families, and damages the sense of fairness and justice that a democracy needs to survive.

It is characterized by semi-monopolistic organizations and banks, big employer confederations, often acting with complicit state institutions in ways that discourage (or block) the natural workings of a free economy.

Some economists, sociologists and anthropologists argue that neoliberalism, or the resurgence of 19th century theories relating to laissez-faire economic liberalism in the late 1970s, has been the significant driver of inequality.

[199] More broadly, according to The Handbook of Neoliberalism, the term has "become a means of identifying a seemingly ubiquitous set of market-oriented policies as being largely responsible for a wide range of social, political, ecological and economic problems.

[203][204] According to Emmanuel Saez: The labor market has been creating much more inequality over the last thirty years, with the very top earners capturing a large fraction of macroeconomic productivity gains.

But by many other measures, especially economic, things have gotten worse, thanks to the establishment of neo-liberal principles — anti-unionism, deregulation, market fundamentalism and intensified, unconscionable greed — that began with Richard Nixon and picked up steam under Ronald Reagan.

[209] Jonathan Hopkin writes the United States is an outlier regarding economic inequality which hit "unprecedented levels for the rich democracies" as it took the lead in implementing the neoliberal agenda in the 1980s, making it "the most extreme case of the subjection of society to the brute force of the market."

[210] Dean Baker argued in 2006 that the driving force behind rising inequality in the United States has been a series of deliberate neoliberal policy choices, including anti-inflationary bias, anti-unionism and profiteering in the healthcare industry.