RESEARCH: EFFECTS OF RISING ECONOMIC INEQUALITY IN THE US

Introduction

Economic inequality, representative of wealth and income inequality, is a consequence of capitalism. Capitalism operates under the overriding assumption that the market economy – given its strict rules of demand and supply – facilitates fair competition between free and equal individuals. In this capitalist context, inequality is acknowledged as a fair consequence resulting from the differences associated with enterprise and hard work. However, rising economic inequality in the United States across age, gender, race, and class – facilitated by inequalities of opportunities and inequality of outcomes – illustrate a systemic lack of freedom and equality across these groups. Capitalism, as a continuation of pre-capitalist hierarchies, entrenches inequality through its insistence on structural domination. Public policy experts have outrightly acknowledged economic inequality as one of the defining challenges of the 21st century. Economic inequality has various social, political and cultural implications. Rising economic inequality, in the context of systemic discrimination and inequalities of opportunities and outcomes, facilitates and reinforces oppression of marginalized communities by advantaged and privileged groups in the society.

The United States ranks higher compared to other developed countries in terms of economic inequality – an outcome that can be attributed to the country’s legacy of slavery and racist economic policies. Modern day United States is plagued with large wealth and income gaps across racial groups. Compared to low-income households, upper income households have experienced more rapid growth in income in recent decades. In terms of wealth, the divide among upper-income families and lower- and middle-income families has risen sharply, meaning that the richest are getting richer faster. This rise in economic inequality can be linked to globalization, technological change, declining unions, and the eroding value of the minimum wage (Horowitz). The most immediate and pressing concern about rising economic inequality is situated in the fact that low- and middle-income groups may experience its burden of diminished economic opportunity and mobility – a phenomenon that economic scholars and researchers refer to as The Great Gatsby Curve. The Great Gatsby Curve argues that high inequality is associated with less economic mobility – meaning, that a child’s future income is primarily determined by parental income (a big factor) (Horowitz). On the background of slavery, segregation, Jim Crow laws, racial discrimination, and racially-targeted police brutality, it becomes even harder for children from minority races and financially disadvantaged groups to climb the economic ladder.

High income inequality is linked to low economic growth. Rising income inequality is not only associated with an upward surge in the income of the wealthy and high-income individuals but also much slower growth in the income of the working poor and low-income households. For poor or low-income groups, disposable income reduces drastically during economic downturns which creates a worrying concern for policy makers with regard to relative income poverty. According to economic theory, greater income inequality may reduce economic growth if it becomes unacceptable to citizens to an extent that they insist on higher taxation and regulation which may significantly reduce the incentives to invest. High inequality may lower trust levels for businesses and corporations as well as pro-business policies (Cingano). In cases where high economic inequality has contributed to an increase in the population of the minority poor and led to the removal of the minimum wage, then the resulting political instability and social unrest may further impede a country’s economic growth. In such conditions, poor or low-income individuals may not be able to afford worthwhile investments. These realities of low economic growth as a result of income inequality further entrench the vicious cycle of poverty observed in poor populations.

Less stable economies: High levels of income inequality are linked to economic instability, debt, financial crisis, and inflation

Economic inequality can be directly attributed to higher rates of health (stress and status anxiety) and social problems in the United States. This link between income inequality and health can be made in three unique pathways. First, is through the structural pathway that interrogates the causal effect of income inequality on residential segregation and spatial concentrations of poverty in poor and low-income communities. Second pathway interrogates the erosive effect of income inequality on “social capital” or “social cohesion” – these effects can be directly linked to health behaviors in a society. Third, the policy pathway, interrogates the various adverse ways in which income inequality – in dictating the formulation and implementation of general social policies – influences health through health-related policies (Su).

Economic inequality is linked to the inadequate containment of the COVID-19 pandemic. The commercialization of healthcare – a tendential movement of capitalism toward a state with minimal welfare – is exemplified in the significant differences observed across economic classes in the response strategies employed by the U.S. rapid health response system in the aftermath of the COVID-19 pandemic. From statistics, the inadequate containment the COVID-19 pandemic significantly impacted low- and middle-income Americans at a disproportionately higher rate compared to the high-income and wealthy groups. Income inequality is associated with differential COVID-19 outcomes across groups and countries. Due to its relatively higher income inequality compared to other developed countries, the United States experienced higher rate of deaths due to COVID-19. These global trends were also experienced at the county level whereby an increase of 1% in income inequality was associated with and increase of between 2% to 3% in COVID-19 incidence and mortality rates (Su). Based on these findings, it’s apparent that there exists a significant association between income inequality and the disease burden of COVID-19.

The economically disadvantaged groups experience a higher risk of exposure to COVID-19 infections and deaths due to their crowded, underinvested living arrangements – the consequences of relative deprivation. Studies conducted within the United States consistently illustrated that ethnic and racial minorities were disproportionately impacted by the COVID-19 pandemic. In an examination of the racial/ethnic prevalence of cumulative COVID-19 hospitalization across 12 states in the United States, studies confirmed disproportionately high COVID-19 hospitalizations for the Black population. For instance, the share of hospitalization of White patients (52.9%) in Minnesota was significantly lower compared to their share of the state population (84.1) – indicating higher COVID-19 incidences across minority communities (Karaca-Mandic). Relative income deprivation, differences in levels of access (purchasing power) between individuals as a result of a shortfall in income, is directly associated with poor self-rated health and has the ability to significantly impact population health in poor and low-income neighborhoods (Kondo). Essentially, income poverty or lower absolute income, as a consequence of income inequality, have adverse effects on health

Economic inequality, as illustrated by the influences of neighborhood economic status and income inequality, can be directly linked to poor health outcomes and increased mortality rates for marginalized races, low-income individuals, and communities living in poor neighborhoods. In a study conducted in Maryland, US., illustrated that despite previously documented racial and economic disparities in mortality, there are indications that several social conditions associated with health create a tendency of unequally affecting African American men living in poverty within the United States. For the U.S. population, based on statistical data observed in 1955 and later in 1995, low socioeconomic status (SES) has always been associated with an increase in risk of mortality. For the adult demographic in the U.S. (over 50 years), those in the lowest quartile of SES had a mortality risk that was 2.8 times higher than that of individuals in the highest quartile of SES (Mode). For this particular outcome, the influence of influence of race and SES on mortality rate is indicative of the reality that economically disadvantaged groups, such as African Americans, bear a disproportionate burden of U.S. poverty and low education.

Economic inequality affects the educational opportunities of children from low-income or poor, minority communities. Rising economic inequality leads to wider educational achievement gaps between the children of the high-income or wealthy groups and their peers from low-income or poor neighborhoods. By the year 1973, the top 5 percent of families in the United States had approximately 15 percent of the country’s total income – a figure that grew to 25 percent by the year 2005 (Campbell). However, as upper-income households experience more rapid growth in income, over the decades, the share of American adults in the middle-income households has decreased significantly – from 61 percent in 1971 to 51 percent in 2019 (Horowitz). Unfortunately, this trend illustrates a gradual growth in the population of low-income and poor households as a result of widening economic inequality over the decades. This growth in inequality is reflected in greater segregation of neighborhoods by incomes – and consequently, in the gradual decline of urban neighborhoods inhabited mostly by poor and minority children. This rising inequality has significantly lowered access to better education for the next generation of Americans from poor communities and low-income neighborhoods.

In this period of increasing economic inequality, the improvements observed in educational attainment in the United States, over the previous century, either stagnated or declined.

Lower rates of social goods

Less social mobility

Lower scores in math, reading and science

Increase in property crime and violent crime

Lower population wide satisfaction and happiness

Low levels of trust and unwillingness to engage in social or civic participation

Lower level of economic growth when human capital is neglected for high end consumption

Conclusion

Based on its broad effects on the social, political, and economic landscape of the United States – amongst other economies, globally – rising economic inequality can be acknowledged as a defining challenge for modern America. As a social problem, rising economic inequality – as a consequence of American capitalism – has been observed to further enhance the oppressive effects of America’s historical past: slavery, racism, segregation, discrimination, and racially-targeted police brutality. The burden of rising economic inequality in the United States, as a result of institutionalized racism, falls squarely on poor, minority communities or financially disadvantaged groups. This burden can be observed in the adverse effects observed in poor health outcomes, economically segregated neighborhoods, disproportionately higher incidences of COVID-19, low educational attainment, low social mobility, and minimal political influence associated with poor minority communities and low-income households in the United States. In the context of America’s history of marginalization and oppression of minority races and groups, rising economic inequality inadvertently enhances the economic and social subjugation of these financially disadvantaged groups – and therefore, constitutes a significant social problem for the modern America.

Work Cited

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Campbell, Mary., Haveman, Robert., Sandefur, Gary., Wolfe, Barbara. "Economic inequality and educational attainment across a generation." Focus 23.3 (2005): 11-16. https://www.irp.wisc.edu/publications/focus/pdfs/foc233b.pdf

Cingano, Federico. "Trends in Income Inequality and its Impact on Economic Growth." OECD Social, Employment ad Migration Working Papers. 2014. https://www.oecd.org/els/soc/trends-in-income-inequality-and-its-impact-on-economic-growth-sem-wp163.pdf

Horowitz, Juliana. Menasce., Igielnik, Ruth., Kochhar, Rakesh. "Trends in Income and Wealth Inequality." 9 January 2020. Pew Research Center. 2022. https://www.pewresearch.org/social-trends/2020/01/09/trends-in-income-and-wealth-inequality/

Karaca-Mandic, Pinar., Georgiou, Archelle., Sen, Soumya. "Assessment of COVID-19 Hospitalizations by Race/Ethnicity in 12 States." JAMA Internal Medicine 181.1 (2021): 131-134. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7432276/

Kondo, Naoki., Kawachi, Ichiro., Subramanian, S. V., Takeda, Yasuhisa., Yamagata, Zentaro. "Do social comparisons explain the association between income inequality and health?: Relative deprivation and perceived health among male and female Japanese individuals." Social Science & Medical 67.6 (2008): 982-987. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC2791046/

Mode, Nicolle. A., Evans, Michele. Kim., Zonderman, Alan. "Race, Neighborhood Economic Status, Income Inequality and Mortality." PLoS ONE 11.5 (2016). https://www.researchgate.net/publication/303027056_Race_Neighborhood_Economic_Status_Income_Inequality_and_Mortality

Su, Dejan., Alshehri, Khalid., Pagan, Jose. "Income inequality and the disease burden of COVID-19: Survival analysis of data from 74 countries." Preventive Medicine Reports 27 (2022). https://www.ncbi.nlm.nih.gov/pmc/articles/PMC9101697/