Skip to main content

Cookies and Privacy

We use cookies to improve your experience on our website. To find out more, read our updated Cookie policy, Privacy policy and Terms & Conditions

The Rising Costs of US Income Inequality

Although the economic costs of income inequality are substantial, the political costs may prove to be the most damaging and dangerous. Indeed, in the US, income inequality has risen to levels that threaten not only the economy’s growth, but also the health of its democracy.

BERKELEY – During the last several decades, income inequality in the United States has increased significantly – and the trend shows no sign of reversing. The last time inequality was as high as it is now was just before the Great Depression. Such a high level of inequality is not only incompatible with widely held norms of social justice and equality of opportunity; it poses a serious threat to America’s economy and democracy.

Underlying the country’s soaring inequality is income stagnation for the majority of Americans. With an expanding share of the gains from economic growth flowing to a tiny fraction of high-income US households, average family income for the bottom 90% has been flat since 1980. According to a recent report by the Council of Economic Advisers, if the share of income going to the bottom 90% was the same in 2013 as it was in 1973, median annual household income (adjusted for family size) would be 18%, or about $9,000, higher than it is now.

The disposable (after tax and transfer) incomes of poor families in the US have trailed those of their counterparts in other developed countries for decades. Now the US middle class is also falling behind.

We hope you're enjoying Project Syndicate.

To continue reading, subscribe now.

Subscribe

Get unlimited access to PS premium content, including in-depth commentaries, book reviews, exclusive interviews, On Point, the Big Picture, the PS Archive, and our annual year-ahead magazine.

https://prosyn.org/OVK0gRO;
  1. lhatheway7_Claudio Santistebanpicture alliance via Getty Images_ECBFedLagardePowell Claudio Santisteban/picture alliance via Getty Images

    Restoring Central Banks’ Credibility

    Larry Hatheway

    The old central-bank playbook of slashing interest rates to spur consumption, investment, and employment has become less effective since the 2008 financial crisis. Yet without effective tools and the public's confidence, central banks will be unable to rise to the occasion when the next recession arrives.

    0
  2. fischer163_action press-PoolGetty Images_natoflagsoldiers Action Press-Pool/Getty Images

    The Day After NATO

    Joschka Fischer

    French President Emmanuel Macron has drawn criticism for describing NATO as brain dead and pursuing a rapprochement with Russian President Vladimir Putin. But now that a wayward America could abandon the continent at any moment, Macron's argument for European defense autonomy is difficult to refute.

    8