Question

Since about 1950, the share of income going to the richest 10% of Americans has steadily increased. What explains this trend?

Answer 1

While income inequality is a serious problem in America since the mid-ninetees, recent data suggests that by 2015, America’s top 10 percent averaged more than nine times as the bottom 90 percent. And the top 1 percent averaged over 40 times more income than the bottom 90 percent. Some of the contributing factors include:

(i) Rapid technological chaneg brought about in America since´the 1950s has led to an increase in the demand for skilled labour at a much higher rate than the demand for workers. As a result, there has been a rise in the wage gap between skilled labours and workers.

(ii) Growing international trade has also contributed to rising wage gap, mainly because low-income jobs are outsourced to developing countries who have cheaper labour.

(iii) Services jobs have increased in the US, but are however much less paying