The issue of Income disparity of the working class has been a prevalent economic issue, especially since the industrial revolution in the United States. In The Jungle by Upton Sinclair, he explores the exploitive nature of capitalism during the infancy of the industrial revolution in the United States and the struggles of the immigrant working class. While this piece of literature is a work of fiction, it gives a typical account of the abhorrent working conditions and the lack of policies which protect the rights of workers. This expose helped push legislation which aimed to protect the rights of workers, and strengthened unions. While this helped with alleviating the issue of income disparity, there has been an increase in income disparity
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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