Rising Income Inequality in the US as Compared to Europe

Rising Income Inequality in the US as Compared to Europe



From 1980 to 2016, income inequality has steadily increased in the United States, but not in Western Europe. https://www.vox.com/2018/7/29/17627134/income-inequality-chart In the United States, over that time period, the richest 1% captured an ever growing share of the nation’s wealth and income, while the lowest 90% stayed the same or lost ground. This is due to a variety of factors: tax policy, compensation policies and educational opportunities. Tax policy has become more regressive – i.e. the rich pay a lot less. Compensation of the top executives has grown disproportionately large compared to all other employees; minimum wage levels have declined in value. Finally educational policies have denied good public school and college education to many low, moderate and middle-income children while affording elite college educations to families in the top 10% of income distribution. Government has played a key role in redistributing income to the top 1% with the Reagan tax cuts and Bush 2 tax cuts. The Trump tax cuts will further exacerbate income inequality in America as they are overwhelmingly targeted to benefit the wealthy and corporations. In the US, we are adding a trillion to the national debt over the next decade and making it ever harder for government to invest in educational opportunity, health care and enhanced job opportunities for those most in need.

Rising income inequality stands in marked contrast to the period from the end of the Depression until 1980, when income inequality in the US and Western Europe was declining. It also stands in sharp contrast to Europe where income inequality has increased only slightly over the same time period from 1980 to the present. In the United States, the share of national income for the top 1% has grown from about 10% to a bit over 20%. Meanwhile the share of national income for the lower 50% has fallen from over 20% of national income to about 12%. In contrast in Europe, the share of national income going to the top 1% grew only from 10% to 12% while the share of national income for the bottom 50% fell from 24% to 22%. https://wir2018.wid.world/

The necessary correctives in the US are: 1) more progressive federal, state and local tax policies, 2) closing offshore tax havens and other loopholes to avoid fair taxation, 3) updated minimum wage, and 4) better educational (and thus employment) opportunities for the children of families of more modest means. That has to be the job of our next President and Congress.


Prepared by: Lucien Wulsin

Dated: 7/29/18




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