Income Inequality in The United States - Literature review Example

Income Inequality in The United States: Are We in the 1920s Again?

The development of social inequality is an overt topic in the history of humanity. While sociologists envisage inequality to encompass power, status, and income, the inequality emanating from the distribution of income is a real and quantifiable facet of inequality. Accordingly, the concept of income inequality has caused questions about whether the United States is retracting to the 1920s. Thus it's critical to examine the articles documenting the state of income inequality in the United States.

The article by Castells-Quintana and José María(826) is a significant piece related to the topic of inequality in the United States. A lot of attention has been given to the performance of international aid beneficiary countries in the past two decades, yet little is known about the role of aid in income distribution in those countries. The article evaluates the role of international aid in income distribution evolution for eighteen Latin American nations over the past two decades. According to the article, Latin America is an unequal part of the globe; however, this region also contains countries that are now on top of the game in reducing inequality on an international scale (Castells-Quintana and José María, 827). Currently, the region has lost a considerable amount of foreign aid disbursement. By reviewing various literature and datasets, the authors point to the fact that international aid plays a significant role in income inequality reduction in Latin America (Castells-Quintana and José María, 828). According to Castells-Quintana and José María( 829), international aid can directly minimize inequality by emphasizing the most impoverished zones of the receiving nations, offering grants or microcredits on the vulnerable groups and focusing on social sectors of high social significance including water, sanitation, education, and health system. Accordingly, when foreign aid is directed towards public expenditure and concentrated on social sectors such as sanitation, health, and education, there is a possibility of it having a positive impact on development indicators such as the human development index rate and the rate of infant mortality.

In an article by Chowdhury and Kwame (22), the authors document the rise in income inequality and its discontent across various regions of the world. Income inequality in both developed and developing nations have been on the rise since the 1980s, specifically after World War II. By reviewing various relevant datasets, the authors highlight that the concentration of wealth has been skewed majorly due to the declining labor shares of the state income (Chowdhury and Kwame, 24). Despite the stagnation in the global economy for over a decade, the number of dollar billionaires in the United States has tremendously increased to over two thousand as the wealthiest 1% of the population of the world has a lot of wealth in comparison to the rest of the world. According to Chowdhury and Kwame (25), this rising economic inequality intimidates the legitimacy of the status quo; however, some have argued that the increasing economic inequality is vital in increasing growth and investment rates. Notably, policy matters significantly as the growing inequality has been intensified by more stringent property rights and favorable policies. For example, privatization has yielded vast transference of public wealth to private ownership. Other policies of trade and financial liberalization, globalization and neoliberal economic policy have also backed up these trends. Chowdhury and Kwame (27), opine that growing inequality is not inevitable as it is socially created through dismantling regulations restrictive of the market oligopolistic excesses, the privatization which kicked off in the early 1980s that has led to the transference of public wealth to private ownership and the transnational corporation led globalization which has significantly weakened the bargaining power of labor. The articles conclude by highlighting the measures to fight the flaring inequality such as the promotion of employment for all, improving access to education and training at all levels by capitalizing on the individuals' skills and lastly by reforming the tax and benefits systems to enhance a rational economic distribution while at the same time promoting economic growth.

Similarly, an article by Hogler, Hunt, and Weiler (63) analyzed the link between culture, inequality, and organized labor in the United States. The article argues that the remarkable cultural values of the United States are fundamental to the drop in the concentration of union membership as well as the rise in inequality. In the United States, the origin of cultural attitudes can be traced back to the colonization process entrenched within the social structures which defined slavery and encumber the general trust development. As such, the people-oriented themselves in policy positions based on their cultural cognizance. Evidence of the framework of inequality in the U.S reveals that in 2008, the top 10% income share rose to levels never recorded before since 1917, reaching 50% of the entire income (Hogler, Hunt, and Weiler, 66). Contrastingly, between 1947 and 1977, the top income remained below 35%. While most would cite the Great recession as being behind the losses in high-income groups, the article argues that the Great recession temporarily depressed the top income shares and would not be the reason behind the histrionic surge in the top income shares that has taken place. The article highlights the fact that hierarchical cultures permit high inequality levels and increases the status gap among people, thereby exerting a negative impact on public policy development (Hogler, Hunt, and Weiler, 71). According to Hogler, Hunt, and Weiler (76), attitudes regarding corporate action and social justice versus personal efficacy and social hierarchy helps in predicting the choices about a policy. This, in turn, impacts the labor unions and the decision-making process yielding inequality.

Galbraith (1074) scrutinized the politics and the pedagogy of economic inequality. The article notes that economic inequality is rising at a higher rate more than it was in the 1920s before the Great Crash and the Great depression. This is because the top 1% of people earn a certain percentage of income and are in control of a particular portion of all wealth. Accordingly, the median wage does not keep up with progressive productivity pointing to the stagnancy in the standards of living. Galbraith (1075) asserts that the rise in inequality is a reflection of the capital market re-organization and capital ownership from manufacturing revolving around large industrial corporations towards wee ones that are richer in finances and technology. As such, capital ownership is focused on a few individuals with high salaries drawn from the venture capitals, which are shared by a few staff. Galbraith (1075) put it that the information and technology, coupled with the 2000 stock market peak, is a pattern in the income inequality measures in the United States. This pattern has been masked due to the huge increases in inequality, which took place in the wake of 1993, motivated by the enhanced tracing of high income that started in 1991 and the changes in the thresholds of coding the top income categories. The article concludes by asserting that attempts to compare the U.S with other states must consider the fact that nations having better measures such as the U.S have a tendency to depict more inequality for a given accurate distribution.

Accordingly, due to the intricate link between income inequality and economic growth, Berg and Ostry (792) conducted a review of the connection between income inequality and the fragile state of economic growth. According to Berg and Ostry (794), some inequality is key to the proper working of the market economy and the needed incentives for growth and investments; however, too much inequality is detrimental to economic growth. Consequently, an inequality not only results in the financial crisis but also leads to political instability which then dejects investments. This does affect governments as they find it hard to make crucial decisions in the face of shock. At the personal levels, the poor access to finances presents fewer opportunities for them to participate in education and entrepreneurial activity. As a result, more inequality transforms to reduced sustained growth through channels such as credit market imperfections and the political economy in which the efforts to use power to affect redistribution results to lower or less durable economic growth. Besides, political instability instigated by inequality results in impaired economic growth. Accordingly, the distribution of income remains to be the most forceful and critical tent associated with the duration of economic growth. The review indicates that technological change in a market economy might yield a higher growth rate and more inequality (Berg and Ostry, 808). Subsequently, inequality is relatively due to market forces. However, if the rise in inequality were an equivalent of the market economy development, then richer countries would be expected to be more equal, and this is not the case.

In conclusion, the concept of income inequality has evoked questions as to whether the United States is retracting to the 1920s. This paper presents a summary of five articles related to the topic of inequality in the United States and whether the U.S is going back to the 1920s. These articles relate to the subject as Nielsen and Alderson’s (22) articles evaluate the determinants of inequality in family income distribution in the United States’ 3100 counties between 1970 and 1990 while Parker and Vissing-Jorgensen’s (10) article. Similarly, a report by Hogler, Hunt, and Weiler (63) analyzed the link between culture, inequality and organized labor in the United States, Galbraith’s (1074) article examined the politics, and the pedagogy of economic and Berg and Ostry (792) evaluated the income inequality and the fragile state of economic growth.

Work Cited

Berg, Andrew, and Ostry, Jonathan. "Inequality and unsustainable growth: Two sides of the same coin?" IMF Economic Review 65.4 (2017): 792-815.

Galbraith, James. "The Politics and Pedagogy of Economic Inequality: A Short Contribution." PS: Political Science & Politics 50.4 (2017): 1074-1076.

Hogler, Hunt, and Weiler, Stephan. "Killing unions with culture: Institutions, inequality, and the effects of labor’s decline in the United States." Employee Responsibilities and Rights Journal 27.1 (2015): 63-79.

Castells-Quintana, David, and José María Larrú. "Does aid reduce inequality? Evidence for Latin America." The European Journal of Development Research 27.5 (2015): 826-849.

Chowdhury, Anis, and Kwame Sundaram Jomo. "Inequality and Its Discontents." Development 61.1-4 (2018): 21-29.