Which Policies Reduce Income Inequality?

US President Barack Obama recently declared growing income inequality and the inequality of opportunity that it creates to be the defining challenges of our time. These problems have risen to the top of the political agenda in the US, but they are not uniquely American problems.

BERKELEY – US President Barack Obama recently declared that growing income inequality and the inequality of opportunity that it creates are the defining challenges now facing America. These problems have risen to the top of the political agenda in the United States, but they are not uniquely American problems.

Income inequality began to widen in the US in the late 1970’s, and the trend spread to Europe by the late 1980’s, affecting even countries with long egalitarian traditions by the start of the new century. On the eve of the Great Recession of 2008-2009, income inequality had reached all-time highs in the US and most developed countries.

The recession and the painfully slow recovery have caused conditions everywhere to worsen, especially for children and young people entering the labor market. The fact that widening income inequality is a common feature of developed economies suggests common causes which are still not well understood.

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