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The Status of Economic Inequality in America

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Economic inequality is also referred to as income inequality, which can be defined as the unequal distribution of income and economic opportunities in a country between different groups. The economic system of the world, especially the developed countries like the USA, have high economic inequality. According to Thompson, “America has one of the highest rates of income inequality as compared to other developed countries”. The economic system has created two major groups in the society; the rich and the poor.

It has become significantly difficult for the poor to climb up the ladder due to the lack of economic opportunities and income. Therefore, the poor and less-privileged part of the society is continually suppressed by the economic system, which is benefiting the wealthy families. Thus, economic inequality is continuing to increase, despite various measures taken by the government. This paper argues that economic inequality exists at high rates in America and examines the factors behind it. Also, this paper analyzes the effects of the economic gaps and the harms it has for society.

The economic inequality in America has been on the rise since the 1970s as the rich people continue to exploit the lower part of the society with less portion in the profits and meagre wages. According to research, it was found that the “top one percent of the Americans based on wealth made up about 23.5% of the annual US income”. This is a major inequality in society as a large portion of the income is shared by the rich. There are multiple reasons for the low income of poor people and the high profits of the rich people.

Globalization has significantly transformed the way businesses operate all over the globe. The American industries and businesses have also been affected by globalization as the investor class and business–owners have shifted their investment and business operations to emerging markets “like China and India to gain high profits”. This has helped them thrives in the global markets and earn huge profits. However, this practice harmed the working class of America as the people were unable to find good employment opportunities, leading to increased unemployment. Therefore, the wages in the country began to decline, and the working class was unable to benefit from the growth of American businesses globally, creating a substantial inequality in the incomes. “The high competition in the global markets caused the businesses to shift from America to other countries to reduce the operational costs”. Therefore, the economic benefits of industrial growth and globalization were mainly exploited by the top wealthy Americans.

Technology has played a critical role in affecting business operations all over the world, especially in America, which is a developed country. According to a study by Wright, it was observed that since the 1990s, “businesses and industries began to employ technology in their operations that increased the demand for skilled workers”. At that time, a large portion of the companies relied on low-skilled jobs that were available easily. However, high-skill jobs required people to be highly educated and trained to gain a good income opportunity. “Americans were more adapted to labor work then the technical jobs based on skills and education, which was being replaced by machines”. Therefore, a large number of Americans were not able to avail the opportunities of employment due to lack of skills and education. Hence, the gap in income began to widen as low-skill jobs became low-paying jobs and were difficult to find.

Labor unions have a high impact on the economic equality of society as the working class can put forward a strong voice through it. “As time passed, the labor unions in the industries continued to decline, and employees were dealt by the employers individually”. The automation of jobs and rapid globalization were the major reasons for the trend of labor unions to decrease in the country. This practice benefitted the employing class, i.e. the rich business-owners, who began to offer low wages to people. The lack of unions weakened the working class, and they had a minor say in economic matters, including their wages. Therefore, the demand of the employees of high wages is neglected by the American employers as they have multiple options due to globalization and “lack of a strong collective demanding voice, which existed previously in the form of labor unions”. The employers continue to exploit the working class by offering low wages, which do not allow them the chance to grow economically. Thus, economic inequality is existing in America and is further increasing.

Capitalism is the culture of an economic system that allows private entities and people to run economic activities like businesses and trade. Therefore, governments have less influence over the economic activities, which enables the businessmen to operate according to their interests. According to Wright, “the elements of loans and mortgages are the key components of capitalism that help businesses operate effectively”. However, these loans and debts harm society as they cause economic inequality. The businessmen and the rich class can afford to take loans for educational, health, and business purposes as they have the financial stability to repay them. On the contrary, the poor and working-class have meagre financial resources, which traps them in the debts for their entire life, “inhibiting their ability to earn more and grow economically”. Therefore, the gap continues to rise between the rich and poor as poor people are trapped by the debt cycles.

In addition to this, the rise of capitalism in America has caused the majority of people to live a life based on weak economic conditions as “they have to work continually for their entire lives to repay the debt they had taken for education, home or healthcare”. However, the rich benefits from the capitalist culture as they can earn through multiple sources like investments in stock markets, saving accounts, and mutual funds. Therefore, economic inequality is on the rise in the USA, which is significantly harming society and its inhabitants.

The rise in income inequality is harming the economic growth of America as the majority of the people are not benefiting from the industrial growth and trade. “The lower class continues to be undermined by the rich, which is increasing poverty ration in the country as people are becoming unemployed due to the lack of opportunities”. The people are unable to afford a good lifestyle with basic necessities of education, healthcare and housing. Thus, society is on the decline, and “the economic growth of America has also reduced to almost less than 2%, with rising levels of poverty”. Besides, the increase in economic inequality is harming the economic structure of the country and create a financial crisis like a recession in future. Therefore, there is a severe need for the government and authorities to take preventative measures to bridge the economic gap in society.

In the end, it can be concluded that the society of America has a high rate of economic inequality that has been growing with time. Factors like rapid rate of globalization, immigration of the people to America, capitalism, a decline in labor unions, and technological advancements have harmed the working class as they are offered low wages in the country. The high competition for employment is further widening the gap and causing negative effects over the society, which include poverty, debt cycles, and decline in the lifestyle of the people. The unequal distribution of wealth is benefiting the top Americans and harming the lower economic class. Therefore, the government must take substantial actions to mitigate the threats and reduce the economic inequality in America.

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The Status of Economic Inequality in America. (2022, August 30). GradesFixer. Retrieved March 25, 2023, from
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