U.S. Income Inequality: High Pretax Economic Capacity, Low After-Tax Outcome - Essay Sample

Introduction

The United States is among the most significant nations with high economic capacity on pretax. When it comes to after-tax, the United States is seen to be among the worst. The difference clearly shows that its income distribution has united a significant margin. The economic policies redistribute the income from the highest earners to the lowest earners in a way that is of a lesser rate as compared to other developed countries.

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When measuring income inequality, the United States Census Bureau does the activity using average income per household (Charles-Coll, 2011). The comparison is usually on a quintile basis, which entails the population is divided into five quantiles for more comfortable and accurate measurements. The other standard measure that is used by the census bureau is the Gini-index (Maio, 2007). Here, the income distribution is put into a single number equated to zero. The name is a perfect distribution to a number where only one person is measured to have all the money.

In recent years, the income inequality of the United States has always turned out to be the greatest among all the superpower nations. The margin of the income between rich and poor people has been increasing since the year 2008 up to date. The rich people got more of their income and made themselves richer through recovering from the financial crisis that was in the year 2008. From the bureau statistics, starting from the year 1993 to the year 2015, families received an average income growth of about 25.7 %. Despite the worsening of income inequality from 2008 up to date, the case worsened from1979 to the year 2007 under various economic circumstances. The rich people in the united states now received high amounts of income from their multiple sources. The primary reason behind the recession, which made income inequality rise very fast, was that most of the economic advantage went only to the rich people of the United States. The rich people grew and developed at a very faster rate as compared to poor people. The people became the number of shares they had in their investments at a very high speed to ensure that they get more earnings from the dividends. With the increase in the number of shares that the rich people owned, several economic factors had to be increased. The details that rose in the American economy included wealth distribution, social security, welfare, among others. The wealth distribution parameters involve getting all the required taxes from the income that everyone receives.

The other major thing that is being blamed on as an increase in income inequality in America is the availability of cheap Chinese labor. Most of the American companies, especially form the private sector, have opened more branches in other nations like China. Through their employment, a good number of incomes goes back to the nation's treasury. With the extension of their business in China, wealthy investors have been blamed for putting the interests of the market ahead of the benefits of the workers. The smaller companies now have to compete with the big companies that enjoy the cheap labor from the Indians and Chinese from the Asian continents equally.

The availability of cheap labor from the Indians and Chinese made the smaller countries to close down or collapse as the big companies thrived. The lower United States were paying their workers' high salaries since they put the needs of the customers first before anything else. The more prominent companies benefited from the cheap labor from China and India, which made them acquire more profits because they invested a little amount of money in paying the workers. At the same time, the income revenue of the rich people in the county increased and will keep on rising due to the kind of investments that are in place by them. Therefore, the rich people who are the owners of the more prominent companies enjoy a higher number of incomes compared to the owners of the smaller companies who receive lesser amounts of income. While the smaller company struggles to ensure that their workers are well paid, they receive fewer profits, which come after the tax by the government.

The other thing making the United States have levels of income inequality is the low exchange rates. The national stock exchange of the United States has been carrying the transfer of shares and the exchange rates in a manner that is unfair. Once this particular channel has been altered, the people who will benefit will ever be the rich people. The reason is that investors in the stock exchange determine their financial capability through the use of several shares the company or the person has in the bank. Without having the right number of shares in any company, the people owning the highest number of shares are liable to make the most senior financial decisions in the company. In the end, the lower-earning people are the ones who will be affected because the rich would have produced economic policies that only favor them economically.

The other reason for making the United States have higher income inequalities compared to countries like Britain, or China is about wealth distribution. The wealth includes all the resources that the nation owns. The wealth distribution has not been fair among all the financial sectors and the rich. When the wealth distribution differences increase at a higher rate, it will negatively bring effect to the state of the economy. Once more of the wealth is unequally distributed to the workers in various places is done, rich people are the ones who will get increased amounts of income. The wealth distributed to the citizens can bring about a lot of disparities in the economy. To add to what they receive as the total income, the people of the higher class will increase their income amounts as compared to the other places in the United States. With these particular plans, the united states will remain in the limelight as people who have the highest number of inequalities on the income.

The other reason that brings the economic challenge of income inequality in the United States is the imbalanced rates of the trading and labor sectors, with this sort of imbalances in the country, the rich are the people who end up getting more income as compared to the lower economic class people. The shortcomings come due to the increased trading activities with big countries like China and Britain. The events have since brought the expansion of the business activities among the rich people while leaving out the individuals of the lower economic class. Only the people from the high economic level are the ones who benefit from the trading activities that are carried out with this rest of foreign countries.

When the government gives green light for investors to carry out trading activities with big nation's most of them are the more significant percentage of the in the companies. Wealthy individuals come out with proper economic plans that last them long in the business sector while making profits. Th explains reason highly takes part in the running of the United States Apple company. The central work station is placed in the heart of California. The United States allows trade regulations between them and other countries.

Through the law, the Apple company has expanded its business activities by more significant margins through the opening of branches in China and other countries. In China, they have sound economic policies that ensure that there is continuous cash flow among every working individual. The apple company will keep making successful profits as compared to those who did not take advantage of trade freedom in the United States. With this happening, the income goes back to banking in the country and benefits only the rich people in society. The ones who will have the best economic benefit will include being the largest shareholders of the Apple company. The people of lesser financial status will get a smaller income and thus allow room for the growth in income inequality in the United States.

Why Income Inequality Has Been Sharply Rising in the United States

Various factors have contributed to the sharp increase in the income inequality of the people. In recent years, some elements have been contributing to the rise of income inequality in the United States (Inglehart, 2016). The factors range from economic to social factors in the nation. The elements have made the range of income between the rich and poor people to widen by a significant margin.

Impact of Technology

The rise in the gap of income among people has been impacted by improved technologies. With new technologies and information flow from one mainstream to another will always bring an impact on the income inequality of the people of the United States. Through mechanization and improved methods of technology, the living standards of most people tend to rise faster. Technology has brought an impact that is positive as well as negative to the economy of the United States.

According to economists called Paul Krugman, technology will always bring a positive and negative effect on the growth and development of the economy (Fujita & Krugman, 2004). There are those people who will benefit from the changes that technology brings while there are those who will stand to lose. Technological inventions can bring some negative impacts on the economic lives of people. For example, when particular technologies are invented by someone of a group of people, the functions of the technology will replace the skills that other people offered in the market. In the end, the people who will be losing are those that are replaced by technology while the owners of the technology will gain more income. As the day go by, the technology keeps on being invented and the ones replaced lose more income. This invention now causes an increase in income inequality

Impacts of Social Life

The various changes in the social life of people have also contributed to the income inequality of the United States to increase. The multiple changes in the United States are leading to some slight increase in income inequality. The people in the United States, most of them prefer to marry whom they share the economic status to preserve their social status. People now interact with people of the same financial background. Most economists define this act as assertive mating. A good number of couples that work receive a similar salary. As compared to the past, the actions were not present. In recent economic times, people opt to marry people of the same financial status to ensure that their financial situation is safe. These acts make the people of the lower financial state keep on having lower incomes, thus high-income inequalities.

The Government's Regulations

The regulations about taxing and other economic restrictions have increased the income inequality in the nations. The wages that employees receive from their employers can well be utilized when the taxes by the government are less on them. The fees and regulations are meant to cut down on income inequality by a higher margin, but in recent years in the United States, it has not been doing as expected. The high-end earners are supposed to be taxed more on their income, while the low-level earners are supposed to be imposed on low levels. The low-income earners are also supported by the government to ensure that they get more income. The recent times have reported more cases of the high-end income earners evading tax payments. The actions have been seen, especially in the private sectors, with increasing evidence of corruption in the nation, which makes the income inequality gap to keep on rising at a sharp rate.

Conclusively, the United States has always been having the right measures to en...