Economic inequality also referred to as income inequality, refers to the extent to which income, commonly measured by household or individual, is distributed in an uneven manner. Social scientists agree that some level of economic inequality is necessary for any meaningful economic growth (Bardes, Shelly & Schmidt, 2008).
However, the implications of inequality have been felt in many countries, including the United States. This paper explores the various causes of income inequality and some ways that can be used to reduce it in the United States.
Among the most commonly cited causes of income inequality includes various demographic changes such as changes in the relative sizes of various age and ethnic groups, increasing number of skilled college graduates, the decline in the number of the traditional families set up (Champernowne & Cowell, 1988). Other implicated causes include globalization and technological innovations, income taxes, increasing foreign trade, and the dynamism observed in the age structure of the society (Bardes et al, 2008).
The Changes in the Age Structure of the Society
The changes in the age structure of the society contribute a lot to income inequality in the United States. According to Thomas Sowell, while commenting on age, he outlined that most Americans grow their income as they advance in age, such that those people in the age brackets of 50 to 60 were several times wealthy than those who were in their 30s.
Some ways of reducing economic inequality include the redistribution of wealth through taxes and benefits. This ensures that the wealth is moves from the rich to the poor to reduce the gap. This has been successfully done in Sweden. Another way is minimizing the differences in pre-tax payment. This ensures that the pay obtained by individuals or households does not have big differences before taxation (Champernowne & Cowell, 1988).
Income Inequality
This is a sure way of reducing income inequality and has been successfully applied in Japan. Other ways include political will in the United States since inequality is a political issue. This can be achieved through the formation of unions and organizations that will champion such reductions (Bardes et al, 2008).
According to Andersen & Taylor (p.197), Capitalism has divided people in the society into capitalist class, working class, petty bourgeoisie, and the lumpenproletariat. The capitalist class has the power and means of production while the working-class trade their services for money.
The petty bourgeoisie lacks the means of production but has the same mind as the capitalist class. The lumpenproletariat is the lowest person who can be easily used and dumped at will. The increasing polarization between the working class and the capitalist class has actually helped increase the income gap between the poor and the rich based on ideologies that are fostered by the capitalist system.
Capitalist System
An ideology refers to belief systems that support the status quo (Andersen & Taylor, 2002, p198). The ruling class advances the ideas that are of interest to them. The capitalist system only works towards the ideas that will bring high returns to them, and this is the main concept that perpetuates income inequality since only the ruling cream benefits from this causing the rest and majority to earn peanuts.
However, a system of ruling with better ideologies can see the reduction of economic inequality. For instance, in the United States, the republican administration has been seen to enhance income inequality but the democratic administrations have been observed to reduce significantly the income inequality(Bardes et al, 2008). The two competing administrations differ in ideologies which bring about the differences in economic inequality.