Inequality in America

Inequality in America: Facts, Trends, and International Perspectives

Uri Dadush
Kemal Derviş
Sarah Puritz Milsom
Bennett Stancil
Copyright Date: 2012
Pages: 94
https://www.jstor.org/stable/10.7864/j.ctt6wpczk
  • Cite this Item
  • Book Info
    Inequality in America
    Book Description:

    A bedrock American principle is the idea that all individuals should have the opportunity to succeed on the basis of their own effort, skill, and ingenuity. -Federal Reserve Chairman Ben Bernanke

    Income inequality has been on the rise since the late 1970s, but the economic and financial crisis of 2008 instigated an unemployment epidemic that dramatically compounded this problem in the United States and catapulted the issue to the center of debate. There is wide agreement across the political spectrum that high inequality is contributing to undesirable circumstances such as stagnant household income, rising poverty rates, and increased borrowing and debt, though there is much less agreement on remedies.

    Inequality in Americaprovides a snapshot of the issues posed by the growing concentrations of income, focusing on the United States but drawing on international comparisons to help set the context. The authors examine the economic, technological, and political drivers of inequality and identify worrying trends associated with its rise. They demonstrate how specific factors have exacerbated income inequality, including technological change, international trade, changes in labor market participation, and the increasing role of the financial sector. Their clear and concise exposition makes the issues surrounding income distribution accessible to a wider public.

    As they write in the conclusion: "We have argued that tackling the worst effects of inequality and re-establishing a measure of equal opportunity requires increased investment in crucial public goods: first, education; second, a more progressive and simplified tax system; and third, increased international cooperation to avoid a race to the bottom. Education, tax, and other such policies are pursued by other highperforming advanced countries and can be shaped for the United States in a way that is fully consistent with an efficient and competitive American economy."

    eISBN: 978-0-8157-2422-3
    Subjects: Economics, Sociology, Political Science

Table of Contents

  1. Front Matter
    (pp. i-iv)
  2. Table of Contents
    (pp. v-vi)
  3. ACKNOWLEDGMENTS
    (pp. vii-viii)
  4. 1 INTRODUCTION: THE CHALLENGE OF INEQUALITY
    (pp. 1-3)

    INCOME INEQUALITY HAS INCREASED dramatically in the United States since the late 1970s. The great economic and financial crisis that hit in 2008 and the persistent high unemployment that has come with it have drawn greater attention to the trend toward marked concentration of income at the top, little or no progress for the middle, and precariousness at the bottom of the income distribution. The problem is now squarely at the center of the political debate. Even among those who view inequality neutrally—or even positively—as the way in which markets reward performance, most agree that some of the...

  5. 2 THE INCREASE OF INEQUALITY IN THE UNITED STATES
    (pp. 4-24)

    MEASURING INCOME INEQUALITY, EVEN in the United States, where good data are available, is complicated. Attempting to compare U.S. trends with those in other countries becomes exceedingly complicated. Precisely defining income is a challenge in and of itself. Income can be measured gross or net of taxes, including or excluding government benefits, and including or excluding realized capital gains (profits made from selling assets). Units of measurement also vary: sometimes households with multiple earners are the taxable unit and other times only individual income earners, regardless of whether or not they share a household.¹ Both official and private sources often...

  6. 3 THREE OTHER WORRYING TRENDS ASSOCIATED WITH RISING INEQUALITY
    (pp. 25-38)

    THERE ARE AT LEAST three disturbing trends associated with the recent American experience—the increased prevalence of poverty, increased macroeconomic instability, and the potentially wasteful and increasing expenditure on “positional goods,” goods from which consumers derive utility based on their consumption relative to that of others, rather than from the goods themselves. We believe that these trends are associated with rising inequality, in the sense that they are partly a result of increased inequality or that other underlying forces account for increased inequality as well as increased poverty, increased macroeconomic instability, and the increased prominence of positional goods. In the...

  7. 4 THE CAUSES OF RISING INEQUALITY
    (pp. 39-61)

    IF THERE IS AGREEMENT on anything in the rich and varied literature on the causes of rising inequality and stagnant median incomes, it is that it is difficult to disentangle causes with any precision. A diverse set of factors— technology, trade, immigration, demographic shifts, and financialization, most of which are inextricably interwoven with policy and the political process—likely have contributed to the rise in inequality, but so far there is no consensus about the relative weight of each factor. For example, most economists would agree that increased international trade—made possible by improvements in communication and transportation technologies and...

  8. 5 POLICY, POLITICS, AND INEQUALITY
    (pp. 62-72)

    NO TREATMENT OF THE causes of inequality in the United States is complete without discussion of the role politics played in shaping the trends that affect inequality and of the role that large concentrations of income at the top play in influencing policies. The latter phenomenon is especially important in the United States because of the high cost of political campaigns and the prevalence of lobbies in shaping legislation. As Senator Mark Hanna famously quipped in the 1890s, “There are two things that are important in politics. The first is money, and I can’t remember what the second one is.”¹...

  9. 6 WHAT CAN BE DONE?
    (pp. 73-77)

    IT IS BEYOND THE scope of this book to present detailed policy prescriptions to deal with the increase in inequality in the United States described in the preceding chapters.

    Nevertheless we would like to outline the elements that should be considered to achieve greater balance in the distribution of income. They can usefully be grouped under three headings:

    1. Policies that can affectmarket incomes(pre-tax and pre-transfer incomes) by affecting the underlying economic drivers of inequality.

    2. Policies that affectdisposable real incomethrough taxes and transfers and reform of the so-called “tax expenditures.”

    3.International cooperationdesigned to...

  10. 7 CONCLUSION: NARROWING THE GAP
    (pp. 78-80)

    WE OPENED THIS VOLUME with Federal Reserve Chairman Ben Bernanke’s reminder that equality of opportunity is a bedrock principle of American society. We feel that the reminder is apt because it is very much the way the country still sees itself and is also the way other nations see America. It is somewhat surprising, therefore, to recognize that the United States is not a very socially mobile nation and risks the further entrenchment of privilege because of education and health care systems that favor the relatively affluent and a political system where money can buy disproportionate influence on policy. Indeed,...

  11. REFERENCES
    (pp. 81-88)
  12. INDEX
    (pp. 89-94)
  13. Back Matter
    (pp. 95-96)