Causes of income inequality in the United States
Overview of the various possible causes of income inequality in the United States of America / From Wikipedia, the free encyclopedia
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Causes of income inequality in the United States describes the reasons for the unequal distribution of income in the US and the factors that cause it to change over time. This topic is subject to extensive ongoing research, media attention, and political interest.
Income inequality in the United States grew significantly beginning in the early 1970s,[2][3][4] after several decades of stability.[5][6][7] The US consistently exhibits higher rates of income inequality than most developed nations, arguably due to the nation's relatively less regulated markets.[8][9][10]
According to the Congressional Budget Office, "the precise reasons for the [recent] rapid growth in income at the top are not well understood", but "in all likelihood," an "interaction of multiple factors" was involved.[11] Researchers have offered several potential rationales.[12][13] Various rationales conflict or overlap.[14] They include:
- Globalization – Lesser-skilled American workers have been losing ground in the face of competition from workers in Asia and other emerging economies.[15]
- Changes in labor demand – The rapid pace of progress in information technology has increased the relative demand for higher-skilled workers.[15]
- Superstar hypothesis – Compensation in many sectors turned into a tournament in which the winner is richly rewarded, while the runners-up get far less. This affects both workers and investors (in dominant firms).[15][16][17]
- Tax policy – Pre-tax income inequality in the U.S. is similar to other developed countries, but markedly rises after taxes and transfers.[18]
- Immigration – Relatively high levels of immigration of less-skilled workers since 1965 may have reduced wages for American-born high school dropouts.[19]
- Decline of unions – Unions helped increase wages, benefits and working conditions. Unionized workers declined from over 30% to around 12%.[20]
- Social norms – Social norms constrained executive pay. CEO pay rose from around 40 times the average workers pay in the 1970s to over 350 times in the early 2000s.[21]