Money Crashers: Income Inequality in America

My latest piece for Money Crashers is one that I really had to sweat over. It tackles a vast and complex issue: the growing gap between rich and poor in America. It took a lot of research and many rounds of editing to get it right.

But I'd like to think the end result is worth the effort. This piece delves fairly deeply into the four biggest questions about the income gap in the U.S.:

• Just how big is it? The short answer is, it's bigger than in most developed nations and still growing. But the article breaks down the answer in more detail, covering gaps in income vs. hourly wages, how income inequality is tied to wealth inequality, and how inequality in this country is inextricably linked with racial inequality.
• Why is it a problem? I explore the many ways inequality is tied to other problems in society (as a cause, an effect, or both). Among other things, I discuss the connection between high levels of inequality and high rates of poverty; how inequality can both cause and be caused by poor education, high crime rates, and poor health outcomes; how inequality can erode social trust and, at high levels, general happiness; and the case for and against inequality as a drag on economic growth.
• What's causing it? There are lots of answers to this question, and I can only skim the surface of the biggest ones: technological change, globalization, immigration, "superstar effects" (i.e., a few talented individuals or companies scooping up a big share of the money to be made in a given field), the decline of labor unions, the stagnant minimum wage, extravagant compensation for CEOs and other high-level executives, and other government policies such as tax cuts, deregulation, and the weakening of the social safety net.
• What can be done about it? This is the biggest question, and the toughest to answer definitively. But I point to a few changes that could obviously make a difference, such as changes in the tax code, improvements in education, a higher minimum wage, union-friendly laws, more regulation of the financial sector, changes in immigration policy, and a greater emphasis on full employment at the Fed. You can argue about how much impact each of these changes would have, and even about whether some of them could do more harm than good, but they're all important to include in the conversation.

I won't attempt to claim that this article is the last thing you'll ever need to read about income inequality. But I think I can sincerely claim it would be useful to make it the first thing you read to get a grip on the subject.

Income Inequality in America – Definition, Causes & Statistics