Income Inequality and Redistribution



Income Inequality and Redistribution

Discussion Analysis

Beyond looking at the average income for members of a society, social scientists often look at how that income is distributed. Income inequality is one of the main indicators in describing how fairly the benefits of society are distributed. This disparity can be looked at either by comparing the distribution differences by things like race, gender, education level or occupation, or more broadly by looking at the overall trend in distribution (Wilkinson & Kate, 2009).

Generally speaking, the income distribution of the United States became more equal during the years after World War II, peaking in the late 1960s, but becoming more unequal in the 1970s and 1980s, increasing in inequality only slightly in the 1990s. The share of income received by the top fifth of families increased from 40.5% in 1968 to 47.2% in 1997, while that of the lowest fifth fell from 5.6% to 4.2%. Of the top 5% (Veall, 2012), the shift is even more dramatic, increasing from 15.6%, to 21.7% over that same period, meaning that most of the shift in wealth went to this small group of very wealthy households.

In comparative perspective, the United States ranks as one of the more unequal developed nations in terms of income distribution. Many other nations have not experience the increase in inequality that the United States has had over the past thirty years. Although international data are often not easily available and not entirely comparable, some conclusions can be drawn. For example, during the 1980s, the ratio of the highest-paid full-time employees to the lowest was 50% higher in the United States than the next nearest country. Among all workers, the annual rate of increase in this measure of inequality was growing at nearly twice the rate of other countries (Sharpe, 2011).

Income ...