Question

Discuss at least seven reasons for income inequality in the U.S. economy by giving examples of how you are or are not affected by each.

Answer 1

Increase in use of technology has led to more automotive work which causes structural unemployment, leading to technology taking over human labour, which increases income inequality. I am not affected because I work in the financial sector which is less automated comparatively.

Globalisation has led to increase in number of cheap imports which is leading to less employment opportunities for the local workforce as there is limited demand for their products. I don't work in the manufacturing sector.

Gender income gap increases income inequality as men are paid more than women. I am affected as I am paid less than what the average male earns.

Stagnating wages is another reason for income inequality as workers wage rates remain stagnant over the years, while inflation rates continue to increase year on year. I am affected as wages have remained stagnant while the cost of living has increased tremendously.

Greater level of population not gaining an education increases income inequality as they are paid less and are often easily laid off. I am not affected as I work in a highly skilled job which requires gaining an education and there are less people who can replace it.

Personal factors such as inherent wealth is pervasive in US which leads to income inequality as generations have wealth in their family, wherein they don't need to work for years on end to earn a living as they have substantial wealth. I am affected as I don't have inherited wealth.

Less availability of credit as poor don't have any collateral and thus don't have access to the credit market. I am not affected as I have access to credit.

Higher levels of household debt due to less diligence by the debt management of the banking system leads to people spending more on interest payments then what they earn. This leads to higher income inequality. I am not affected as my debt to Income ratio is low.