Income inequality in the U.S. is continuing to expand, and the issue is beginning to attract widespread attention. Although the country’s economic recovery has prompted more discussion about the conspicuous income gap, it is really a continuation of a trend that existed before the recession. The trend is, however, growing undeniably stronger since the recovery. As these conditions persist, a two-tiered economy that shrinks the middle class is emerging.
The Privileges of Wealth
Many factors have contributed to the growing wealth gap, and they have created a powerful trajectory that will be difficult to alter. Privatization and the perpetuation of deregulation have stimulated income growth for the wealthiest sectors, and this has increasingly strengthened their influence over political and economic policies. Money, power and influence have naturally made it easier for the wealthy to advance their own interests.
To further widen the wealth gap, the outsourcing of jobs to nations offering cheap labor has driven profits to the wealthiest sectors, leaving workers at home scrambling for sources of income. Companies raking in record profits are also following a trend of holding cash rather than reinvesting it. This funnels incomes to shareholders in the short term, but it stagnates opportunities for the workforce and the economy.
The wealthiest sectors also have access to avenues of income that are closed to other segments of the population. The middle and working class families with their wealth tied to their home values suffered devastating losses in the recession, but affluent Americans with wealth invested in stocks, mutual funds and complex investment vehicles rebounded tremendously and continue to prosper.
Impact on the Middle Class
As the rich get richer and the poor get poorer, many members of the middle class find themselves sinking into the poorer classes. In an economy that requires money and influence to succeed, the declining wealth of the middle and poorer classes means fewer people have the opportunity to elevate their economic status. Higher education and financial investments, two of the major resources used for income improvement, are increasingly out of reach. The decline of income that perpetuates a deterioration of opportunities has become cyclical, and the solution is fast becoming a matter of debate among economists and policymakers.
What the Future Might Hold
Rather than a thriving economy creating a strong middle class, it is a strong middle class that ensures a thriving economy. Buying power from only one small segment of the population does not nurture a healthy economy, even if that small segment is wealthy. To flourish, an economy requires a robust middle class. When an economic system features a strong middle class, it has a broad sector of the population to spend money in ways that are productive for the economy as a whole.
Unless policy making begins to address the income gap, the population will have gradually less effective spending power. In this case, impaired growth for the entirety of the economy will be inevitable. An economic system that performs poorly is also linked to environmental decay, increased crime rates, and declining health of the people. History has not been kind to societies with significant economic stratification. For a rosier outlook, the opposing political ideologies currently responsible for policy making will have to acknowledge the causes of the wealth gap, and they will need to put aside the polarization that allows it to persist.