Reasons for Income Inequality

by Walter Johnson ; Updated July 27, 2017

Few will deny that income inequality is rising in America. As of 2010, corporate CEOs make almost 300 times what the average worker makes, up from 30 times back in the 1970s. The top 10 percent of wage earners make almost 45 percent of total income today, up from only 27 percent in the late 1960s. The causes of this and other examples of inequality are many and remain complex and controversial.

Education

A consistently useful measure of income potential is education. Since the 1970s, education has grown as a reason for income disparities. According to statistical work done at Georgia State University, having a college education is always positively correlated with higher income. In the 1970s, the correlation began to weaken, but it picked up again soon after. Between the late 1960s and the late 1990s, those with college degrees made up to 60 percent more than those who did not attend college. This is up from 40 percent in the 1960s. It continues to widen as technology continues to demand more skilled labor.

Marriage

Higher-income homes normally have two wage earners. Upper-class men and women tend to marry each other, so they have two higher-earning workers. However, only 15 percent of the lowest-earning 20 percent of families have two incomes. This suggests that single parenthood is an important cause of poverty and income inequality, according to the Center for Public Policy Analysis.

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Stock Market

Despite the recent difficulties in the stock market, the long bull market of the late 1990s contributed significantly to the wealth of upper-income earners, who are more likely to invest in stocks; this contributed to income inequality, according to a recent article by National Public Radio, or NPR.

Technology

Rapid increases in modern technology have made certain jobs obsolete, according to NPR. As those jobs have been removed or transferred overseas, newer careers for those well educated in the high-tech sector have opened up just as rapidly, suggesting that education means more than ever in terms of income potential.

Health

Poorer people are generally more unhealthy than upper-income people. Studies by the National Bureau for Economic Research strongly suggest that health is and has been a major — and often neglected — cause of income inequality by placing more of a health burden on the poor. Poor people often have poor diets that can lead to serious health problems later on. These health problems are expensive, and as health insurance premiums go up -- even more so for the poor who already suffer from poor health -- income inequality widens that much more.

About the Author

Walter Johnson has more than 20 years experience as a professional writer. After serving in the United Stated Marine Corps for several years, he received his doctorate in history from the University of Nebraska. Focused on economic topics, Johnson reads Russian and has published in journals such as “The Salisbury Review,” "The Constantian" and “The Social Justice Review."

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