Question

Research income inequality in the USA.

1. Present a snapshot of income inequality in the USA.

2. Discuss a few factors that have contributed to income inequality in the USA for the past few decades.

3. What can be done to reverse that trend?

4. Provide an analysis of the concepts presented that demonstrates and summarizes the various factors that influence competitive markets and how these factors relate to income inequality.

Answer 1

1. Income inequality in the United States is the extent to which income is distributed in an uneven manner among the American population.

2. a) Economic development:- In previous literature on factors of income inequality, the factors related to economic development have undoubtedly got most attention. These factors are: a country’s wealth (mostly measured as Gross development program per capita), economic growth, technological development and the development of economic.

b)  Demographic factors
The next group of factors of income inequality involves demographic factors, such as urbanisation, age structure of population, and composition of households, and also includes factors related to education such as the population’s educational
level, education inequality, and education expenditure. These factors have also been widely studied in previous literature.

c)  Political factors
There are also political factors that are supposed to influence income inequality, such as the shares of the government and the private sector, democratisation, liberalisation, etc.

d) Cultural and environmental factors
In the formation of income inequality, an important role is played by cultural and environmental factors. This group of factors comprises land concentration, cultural variation, shadow economy, corruption and also the abundance of natural resources.

e)  Macroeconomic factors
In the last two decades, macroeconomic factors have been considered as factors of income inequality as well. It has to be noted here that even though economic development can be classified as a macroeconomic factor, it was reasonable to
consider the factors related to economic development in a separate chapter because of the much greater attention that they have got in pertinent literature. Inflation, unemployment, financial development, export, import and foreign investments are considered as macroeconomic factors.

3. Increase the minimum wage.Research shows that higher wages for the lowest-paid workers has the potential to help nearly 4.6 million people out of poverty and add approximately $2 billion to the nation's overall real income. Additionally, increasing the minimum wage does not hurt employment nor does it retard economic growth.

Invest in education.Differences in early education and school quality are the most important components contributing to persistent inequality across generations. Investments in education, beginning in early childhood with programs like Head Start and Universal Pre-K, can increase economic mobility, contribute to increased productivity and decrease inequality.