Income Distribution in the U.S - Essay Example

Introduction Income distribution according to economics is the amount of total output of an economy distributed to the total number of people or factors of production; labor, capital and land. The income distribution is derived by dividing an economy’s gross domestic product with its total population. The income distribution is used to measure and classify the share of income within an economy. It should be noted that the method has highly been criticized as a method to show the true distribution of income within an economy. Thus when it comes to showing the distribution of income among households major adjustments are made to come up with the conclusions. It looks at the income that the rich and the poor are getting. It also critically looks at the factors that can lead to income distribution inequalities like taxing, technology and globalization. It helps in explaining various theories like human capital and economic discrimination. For this purpose, it helps an economy to come up with ways to reduce the gap between the rich and the poor. It has been a global concern in fighting poverty. Even though poverty can not be fully eradicated it can be reduced. It is important to look at how factors of production are distributed within an economy. How easy it is for every individual to access these factors is another way to know how well the income is distributed within an economy (Richard, pp.345-450). The income distribution trends in the USA It is important to look at the income distribution trends in America to find out how the gap between the rich and the poor can be reduced. Very many economists are interested in fighting the gap between the rich and the poor. The gross domestic product (GDP) has been refuted in telling if the citizens of a country are rich or poor. Many economists argue that a country can have a very high gross domestic product but it is only being produced by 10% of the citizens who are the elite and affluent people of the society. The Gini coefficient has been used by the American economists to tell if the country has equal distribution of income. It can simply be said that some professions are well paid but others earn very low wages (Richard, pp.345-450). It is notable that 1948 to 1968, the Gini coefficient reduced. When the Gini coefficient reduces then it means that the citizens’ income per citizen is increasing. Thus between those years the income inequality in America had reduced meaning that families were receiving more income than before. On the contrary, the Gini coefficient increased between 1968 and 1998, this meant that the income inequality had increased among the American citizens. Income inequality in America is due to vast changes in how earnings are distributed. The labor market provides how income is generally distributes to individuals within a country. By looking at this, then one can come up with how income is distributed within an economy. In America, one will find that business owners earn a lot of money while those who work for them earn peanuts. They are given monthly salaries and wages that can serve to pay their bills and sometimes they can not pay all the bills. This leaves very many Americans to have substandard lives in order to at least have access to the basic needs; food, shelter, health, clothing and education. It is evident that most Americans can not afford the health care insurance. This is so because most of them are just casual workers who are over worked and are not paid according to employment Acts. Employers use the fact that the people are in great need to get money thus us this to exploit them as they make money for them. For this reason, one finds that America is doing well when it comes to the gross domestic product but in the real sense it is being held by the affluent and the elite who are only 10% of the population (Richard, pp.345-450). Earnings among races, men and women In America, income distribution inequalities have been blamed in gender. It is said that income distribution among men and women is different. In 1967 to 1998, the Gini coefficients of both men and women who work full time have changed. In 1967 to 1980, the Gini coefficient reveals that men’s earnings were stable as it did not change as much. It only increased in 1980 to 1989 when it increased to 0.361 from 0.315 percent. This means that income distribution among full time working men was becoming unequal. On the other hand, women percentile changes were quite different. Between 1967 and 1986, women’s Gini coefficient did not rise. When the men’s income distribution was stable between 1967 and 1980, the women’s unequal income distribution had reduced by 0.033 percent. That meant that women’s unequal income distribution had reduced. The problem came in when the Gini coefficient returned to the 1967’s rate by 1989. This is when the Gini coefficient increased by 17.0 percent as compared to 1980 rates (Richard, pp.345-450). Women and men who worked all year as full time workers experienced unequal income earnings that saw the increase in unequal income distribution within the country. Due to such increases, the household living capacity has changed over the years where a family can be of two people and not very many people as before. This is because the bills have become very many and to maintain a good and comfortable life it is better to have fewer people living around someone. The levels at which women earn income is low as compared to the men. More so, some races are found to have a characteristic of having the median income levels that is way below the national median level. Some economists argue that the unequal income distribution being rampant, in specific races open doors for more discrimination although there are efforts being made to ensure that gender and race issues are faced out. Others argue that women are to be blamed for the unequal income distribution as they do not consider salary rates when they are looking for employment. It is argued that women look for comfort and how convenient the work place will be. Studies show that women are not willing to relocate due to employment, put in more time to work that is, over time, they take more lives and offs and more so, they attend colleges and not universities thus the training they get gives them low paying jobs. For such reasons, the wage gap between men and women is very wide making unequal distribution of income to increase over the years (Richard, pp.345-450). In America, one will find most women working in the government sectors and non-profit entities. Such institutions give very low income thus a person can not build herself in terms of their career. The government is a very comfortable place to work for thus one finds that they have worked in the same office holding the same position with the same income for over thirty years. With such rates it is hard to deal with the income distribution disparities because it is an individual’s choice and not the general public. Moreover, women and people of specific races do not have the chance to get a promotion. This is due the discrimination an employer could be having against people of specific races or women in general. In addition, women and the minorities are not able to get any employment chances due to such discriminations. For this reason they can not build themselves economically because even though they start up a business, many are not willing to support them at all. All this, according the women is referred to as the glass ceiling that is, ways to keep women away from climbing the economic ladder. More studies reveal that European Americans have a higher chance of being employed compared to the African Americans and they both hold the same qualifications. For such reasons, the elite African Americans remain economically disabled because they do not get a chance to use all the knowledge and skills they have gained from colleges and universities. They usually find themselves underemployed that is, doing jobs that are lower than their qualifications. Despite the same levels of education, the unequal income distribution remains due to the gender and race discrimination within America. The figure 1 below shows that African American and Hispanic women are not likely to be employed as they are below the median income as compared to European American and Asian men who are way above the median income (Richard, pp.345-450). Figure 1: showing the income distribution differences between men and women of different races (Richard, pp.345-450). The figure shows that women in America have low income rates as compared to the men. It also reveals that the Asian and white men have the most income levels while the black and Hispanic men suffer low income rates. Figure 2 shows the men and women’s median income rates between 1953 and 2005 (Richard, pp.345-450). The figure shows that the median income of American men is higher than that of the American women thus the rise in unequal income distribution. Despite the great gap that is being experienced right now as shown by the two figures, the income gap between the two groups has reduced. This is because today, women have now seen the need to go to universities and acquire higher levels of education. Many women are now holders of degrees, masters and doctorates than men in America. Between 2006 and 2007, women are said to have a higher number of doctorates than men and the number is seen to be increasing over the years. Though the numbers have just increased recently, it is hard for the income gap to reduce abruptly thus it still leaves the men earning highly than women. The gap reduction will be experienced in years to come. It is evident as of late the median income of women has risen to 157.2% as compared to men which is 36.2%. This means that the median income of women is rising at a faster rate and soon it will catch up with the men. The rise in education quality of women ahs increased the number of women in the corporate field thus it means that in the years to come the income gap between the men and women will reduce (Robert, pp.208-224). Promoting gender equality has led to reduction in the difference of women and men earnings over the years. As compared to 1953, when men earned 176% more than women, today they earn only 68% more making the difference to have reduced by 61%. As the median income for women is increasing over the years, the men’s median income remains stagnant. It has not had any vast increment and even though it faces many fluctuations, it is not increasing at a faster rate than that of women. Since 1973 to 2005, the median income for men has only increased by 2% while that of women has increased by 74% (Robert, pp.208-224). Another factor that has led to unequal income distribution in American is race discrimination. Where white and Asian men in America earn 109% of the income which is twice as much as what a Hispanic woman can earn. The education background of these groups are very different as the white and Asian men hold very many degrees in respective fields leaving Hispanic women with very little or no education at all. Despite all this, having the same educational qualifications, in 2005 studies, the Hispanic women earned 103% less than the white and Asian men. This is due to unequal employment opportunities that women can not be employed and more so, the race of Hispanics is considered as minorities therefore discriminated against (Robert, pp.208-224). Changes that have affected the income distribution The fact that more women are now being educated is a way to the long awaited dream in America; equal income distribution. Education has played a major role in enhancing the gap between the rich and the poor in America. As many women are educated they tend to learn their rights and thus can acquire higher places at the work place making them to earn as much as the men with the same qualifications. Women have become very cautious with their rights and they have learnt that as long as they have the same educational background with a man, they are subject to earn the same amount of income and they also need to be promoted just like the men. Women have become more aware of the importance of acquiring higher educational levels as doctorates (Robert, pp.208-224). Gender equality is a very important phenomenon in fighting America’s unequal distribution of income. This will definitely remove the bad identity that it is among the richest countries in the world yet it has the highest unequal distribution of income. It is important for everyone in the economy to have access to the levels of education as it will increases the competitive nature of individuals within the economy making the production levels to increase and become better of. This is because through education, people gain the best knowledge and skills, and if a country’s people have the best skills it means that the country will benefit in terms of production (Robert, pp.208-224). Race discrimination is another issue but it has decreased over the years though it is being practiced by some people. At least today, the minorities can now have access to the same education as the European Americans who are considered to be better off. The fact that the African Americans and Hispanics can get their degrees is a big step to fighting the race issue that has highly contributed to the unequal distribution of income within America. The people of the discriminated races can now fight for their rights if they are harassed at their work places. They have acquired professional skills in that they are able to start up their own businesses that are run professionally. With such competition, the people who discriminate against the minorities are ashamed and are bound to respect them. If respect continues within America, then it means with the generations to come, such discriminations shall come to an end (Robert, pp.208-224). Conclusion It is evident that unequal distribution of income within America is brought by the fact that there is both gender and race discrimination. The government therefore, has a very big calling to help in decreasing such issues. It can only do this by creating a free America for its people. That is why, for anyone who discriminates against a person is bound to be imprisoned or fined for such a cruel act. It should continue in educating all races on the disadvantages of race and gender discrimination. It has the responsibility of educating Americans on the importance of looking at each other in terms of Americans and not races and gender. By setting up laws that do away with sexual harassment at the work place, it will help many women to work freely and also make them increase their skills and knowledge to be promoted without giving sexual favors. The laws of sexual harassment at the work place have really helped the women in getting what they really need when it comes to their careers. It needs to set up strict immigration rules to prevent people who take immigrants and employ them under very poor conditions and give them very little earnings. Such illegal immigration of people is increasing the rate at which the unequal distribution of income is increasing. In conclusion, the government is supposed to intervene to ensure that the unequal distribution of income has reduced. References Richard Freeman., 1997. “When Earnings Diverge: Causes, Consequences and Cures for the New Inequality in the U.S. page 345-450. Robert Reich B., 1991. “Work of Nations”: Why the rich are getting richer and the poor, poorer. Chapters 17 page 208~224. Read More