Economic Effects Of Income Inequality

1863 Words8 Pages
1. Introduction

Income inequality has grown significantly during this past decades and this phenomenon continues to increase over the years. This problem is constantly discussed in the daily news all around the world. Several consequences of this increase of inequality between people leads to economic problems such as high unemployment rates, lack of work for young people, fall of demand for certain product. The gap between rich and poor is increasing, the rich are richer and the poor are poorer as a result politicians and economists try to adopt certain policies in order to reduce this gap. The United States exhibits a wide difference of wealth distribution between rich and poor people, which is larger than any other major developed country.
…show more content…
Effects of income inequality

The impact of economic inequality affects a large part of the population in different ways. The most obvious effects of wealth inequality are that it creates social classes. The first subdivision that we can draw is that population is split in two categories: the rich and the poor.

There are a variety of economic effects caused by income inequality. Wealthy people have a higher income and consequently spend less of each marginal dollar, which caused the economic growth to slow. Economic inequality is also one of the reasons of the Great Depression that occurred in the United States in August 1929. The Great Depression period was when the country first went into an economic recession. This period caused massive unemployment and an economic downturned. Income inequality can also cause a lower demand. This unable people with law income to afford some goods and services this caused the overall production and employment
…show more content…
The causes of inequality in the United States are diverse. The racial difference that exists in the United States has a major impact on the wage distribution, the blacks and Hispanics citizen are less respected than the white population. The other major cause of this inequality is the lack of high skilled people. There is a real problem of education level in the United States. The impacts of income inequality on the US population are also different. Income inequality had an enormous impact on the United States’ history with the Great Depression that occurred in 1929. The principal impact of income inequality is surely the poverty rate that increases in the United States because a lot of the income goes to the richest population. As explain in this paper there are a variety of different technics to calculate the inequality within a country, some methods are more reliable than others. The most commonly used method is the Gini coefficient, which can help to compare the level on inequality between countries. In order to reduce the inequality in the country, the government try to found some solutions. In the United States, an increase in minimum wage is one of the solutions to reduce the gap between rich and poor. Another issue is to tax more the wealthiest in the United States, this could help the poorest

More about Economic Effects Of Income Inequality

Open Document