Income inequality in US hinders growth, social mobility


The Appalachian Online

Kevin Griffin

Business Insider recently published a disturbing fact about income inequality in Boone. The town was ranked No. 6 on a list of the most unequal cities in the country, with the bottom 20 percent holding 1.5 percent of income, while the top 5 percent held 35.1 percent.

That certainly seems staggering, but makes sense given the population of college students. The article states, citing an explanation given by Ben Casselman of the FiveThirtyEight blog, that towns with a higher percentage of college students have higher disparities since college students typically have lower incomes because of the jobs they typically work.

Indeed, Boone drops out of the list when only non-college towns are considered.

While that does make the situation somewhat better, the survey does bring up an important issue that is frequently glossed over in public discourse. Income inequality in the United States has grown dramatically over the past 30 years, and this has negative effects on the country.

Certainly, a capitalist economy is going to have some level of inequality, and I do not think that is an entirely bad thing. The differences in difficulty and skills required for various occupations justify some level of inequality.

However, what we are seeing now is so extreme that it threatens certain touted American principles.

A major study published by the Congressional Budget Office in 2011 found that income had increased by 275 percent for the top one percent while only growing 18 percent for the bottom 20 percent between 1979 and 2007.

This trend is negative both practically and philosophically. Income inequality has had a demonstrable effect on limiting the growth of the economy over the last few years.

A December 2013 survey of economists conducted by the Associated Press documented some of the ways inequality inhibits economic growth. The primary reason is that middle and lower income people spend more of their incomes than wealthier people do, thus fueling the economy. Since most income is flowing to the top, the spending of lower and middle class individuals is diminished.

More troubling than the economic growth impact, however, is the effect on the key American principle of social mobility. It is something all Americans are told: hard work and ingenuity can lead to economic gains.

Unfortunately, that is not the world we live in. A spring 2013 Brookings Institute report found that much of the increase in inequality had been permanent, meaning the chances of advancement for lower income individuals are shrinking.

This reality destroys the myths that most Americans like to believe about how our society works. We would all love to live in a world where individual merit translated into economic returns, but we do not.

However, it is a problem we must address. We should develop a system where things like hard work and talent can lead to advancement. This is not a matter of demonizing wealth, but in examining the systemic factors that hinder social mobility in this country.

How exactly to go about that is a little bit more challenging, but there are some answers. We could change the tax policy to restore a more equitable burden and raising the minimum wage, among many other potential policy actions.

The key is in recognizing, and conveying to others, that this is not about soaking the rich because they are inherently evil. This is about addressing a problem within our society that interferes with the potential for advancement of a significant segment of the population.

Griffin, a junior journalism major from Madison, is an opinion writer.