Household Income is highly correlated with student outcomes, and the income gap is believed to be the main contributor to disparity in academic success by many researchers. If you ask 100 Americans, 61 would agree that the country has too much economic inequality (1). But is the inequality in the country really that bad?
According to UC Berkeley Economist Emmanuel Saez, the top 1% earners in the country made an average of $1,457,269 in 2018, almost 40 times the average of $36,397 made by the bottom 90%; the difference in income between the top 0.1% and the bottom 90% is even more striking with the former making over 196 times that of the latter.
This huge difference in income is actually the worst in our history and resembles that in the infamous gilded age. The ratio of the top 0.1% income to the bottom 90% peaked at 205 in 1928. It declined subsequently because “ social movements and progressive policymakers fought successfully to level down the top through fair taxation and level up the bottom through increased unionization and other reforms.”(2) The ratio rose again in the 1980s and spiked to 220 in 2007, right before the Great Recession.
The rise in income inequality also means that the rich are getting richer faster than the bottom 90%, as seen in the graph below:
To add insult to injury, America’s income inequality is the worst among advanced economies.
What has caused the rising income gap? What has been done to narrow the disparity? Can we learn something from the other economies?