Causes Of Income Inequality

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Income inequality refers to the degree to which income is distributed in an uneven manner amongst the population. In the United States, this huge gap between the rich, and the middle and lower class has been steadily increasing since the 1970s. Starting in the mid to late 1970s, the higher earners income share began to rise dramatically, while those in the bottom tier started to fall. Income inequality has once again become a major economic issue, and the cause can be traced back to several occurrences over the past forty-six years.

Before World War II, worker’s wages steadily grew in proportion to productivity levels. But starting around 1964, the earnings of a typical worker began to level out, while the gain from productivity continued to grow. Labor unions were also established prior to World War II, which allowed workers to gain a share of national income relative to their output. This helped to build a healthy and robust middle class.
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In 1928 and 2007, a time when the most affluent part of the population held the highest percentage of total income, the economy was especially weak. In the subsequent years, the economy collapsed. However, during the intermediary years, between 1928 and 2007, when the most affluent part of the population held a much lower percentage of total income, the rest of the population’s income steadily grew and the economy flourished. If income accumulates in one general group of the population, such as it did in 1928 and 2007, it allows the rich to determine how much taxes they pay. As a result, when they received the highest percentage of total income around 1920 and 2007, they only had to pay 25% and 35% of taxes, respectively. However, during the intermediary years, when they held a much lower percent of total income, they had to pay around 91% of taxes. This is due to the total income being dispersed equally amongst the

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