This was not an alarming issue to economists since the common thought was that inequality is good for growth, that paradigm has changed within recent years (Milanovic, 2011). While this disparity is on par with other developed nations before taxes and transfers are taken into account, this disparity becomes more pronounced when taxes and transfers are taken into consideration (Cassidy, 2013). While this may be the case, the federal tax policies are progressive in nature which does reduce income disparity (Congressional Budget Office, 2011). This suggests that the increasing income disparity is a result of other outside factors. Earning power has increased in the top 1% of earners. In the 1980’s, the top 1% of income earners in the US earned 10% of the pre-tax wages (Noah, 2012) but that number has increased to 20% by 2013 (Piketty, 2014). Another worry is that this consolidation of wealth that we have seen in recent years may lead to monopolization of labor, which may lead to less consumer freedoms, general lack of competition, and other market manipulations which were discussed in class (Lynn and Longman 2010). While income disparity is a major factor in the changing economic climate in the United States, there are political changes which need to be taken into account, such as the globalization of markets through free trade, and changes in laws regarding unions, as well as changes in tax
This was not an alarming issue to economists since the common thought was that inequality is good for growth, that paradigm has changed within recent years (Milanovic, 2011). While this disparity is on par with other developed nations before taxes and transfers are taken into account, this disparity becomes more pronounced when taxes and transfers are taken into consideration (Cassidy, 2013). While this may be the case, the federal tax policies are progressive in nature which does reduce income disparity (Congressional Budget Office, 2011). This suggests that the increasing income disparity is a result of other outside factors. Earning power has increased in the top 1% of earners. In the 1980’s, the top 1% of income earners in the US earned 10% of the pre-tax wages (Noah, 2012) but that number has increased to 20% by 2013 (Piketty, 2014). Another worry is that this consolidation of wealth that we have seen in recent years may lead to monopolization of labor, which may lead to less consumer freedoms, general lack of competition, and other market manipulations which were discussed in class (Lynn and Longman 2010). While income disparity is a major factor in the changing economic climate in the United States, there are political changes which need to be taken into account, such as the globalization of markets through free trade, and changes in laws regarding unions, as well as changes in tax