Comprehensive Analysis of Income Inequality in the US Economy

This report provides a comprehensive analysis of income inequality, particularly focusing on the United States. It explores the causes of income disparities, including wage structures, education levels, and gender discrimination. The report details the consequences of inequality, such as stifled econo...Read More

Comparative analysis of
income inequality
Analysis of different views

Income inequality
What is it?
• Disproportionate
distribution of
income.
• Creates
difference among
wealth of
different
segment of
population.
What is the cause?
• Different wage
structure.
• Level of
education.
• Gender
discrimination.

Income inequality
Consequences of
income inequality
• Stifles growth rate of
the economy.
• Increases the crime
rate.
• Deteriorate the
health standard.

Changes in income inequality overtime
in the US.
• Top segment of
the population
got impressive
growth in
income.
• Corresponding
figure for the
bottom segment
of population is
disappointing.

Debates over the size of income
inequality in the US
• According to few
economists, the size
of the inequality is
alarming.
• Others points out
that wrong
representation
mislead the
government
regarding the
income inequality.

Political differences pertaining to
income inequality
What creates the
difference?
• Difference in
opinion regarding
the impacts of
minimum wage.
What are the
differences?
• Differences in terms
of government
policy.
• Differences in terms
of data implication.

Ways to reduce the income inequality
in the US.
Differe
nt ways
Increase
minimum
wage.
Progressiv
e taxation.
Investmen
t In
education.
Asset
maximizin
g policies

How the government intervenes in
case of crisis
Government’s
action
Expansionary
monetary
policy
(Monetary)
Reduction in
the interest
rates
(Fiscal)

How the government intervenes in
case of crisis
•Rightward shift in the
aggregate demand curve.
•Increase in the level of price
and the overall output level in
the economy.

Main goal of an economy
• Focus on low income
inequality.
• Adequate
distribution of
wealth within the
economy.
• Low differences and
hence low crime
rate.
• Better stability in

Societal balance
How can the
government
maintain low
inequality?
• Redistribution
policy must be
adequate.
• Government needs
to spend on
infrastructure
Real cost of low
income inequality?
• Reduced rate of
economic growth.
• Low purchasing
power compared
to other
economies.

Critical Thinking
and reflection

Range of options government have to
reduce wealth and income inequality.
• Progressive tax
code
• Social security
payroll tax
• Cash and non
Cash benefits.

Essential policies and crucial policies
Essential policies
• Progressive
taxing
Crucial policies
• Social security
payroll tax

Are higher economic growth and more
equitable distribution conflicting?
• Earlier it was
thought with
prosperity,
inequality would
reduce.
• Now empirical
study shows,
higher the growth
rate higher is the
inequality.

Major cause of inequality in the
US • Low paid service
sector job.
• Chinese influence
in manufacturing
sector.
• Technology
intensive
businesses.

Measures to determine the extent of
income inequality
How can we measure the income
inequalities?
• Gini Coefficient.
• 20:20 Ratio How can
we
measure
the
income?
20:20
Ratio
Gini
Coefficien
t

Program aimed at reducing income and
wealth inequalities in the US.
Economic policies
• Government expenditure towards
infrastructure development.
• Tax rate where the productivity is
high.

Program aimed at reducing income and
wealth inequalities in the US.
Social policies
• Equal pay irrespective of gender, race
and religion.
• Inclusive education policies

Reference
• Garrett, T. (2019). U.S. Income Inequality: It’s
Not So Bad. Retrieved from https://
www.stlouisfed.org/publications/inside-the-vault/
spring-2010/us-income-inequality-its-not-so-bad
• Markovich, S. (2019). The Income Inequality
Debate. Retrieved from
https://www.cfr.org/backgrounder/income-
inequality-debate