Wealth Inequality in Usa

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According to census conducted by federal government in 2013, 21 percent of families fell into upper income categories with an increase in income rate to more than 250 percent, and 46 percent of people fell into middle class category with income rate of 37 percent and remaining 33 percent people was considered to be poor or low income families with income rate of 18 percent. The average upper-income family's wealth remained at $639,400, which is measured as 7 times greater than middle class family, who had $96,500 as seen in figure below (Claire, 2015).

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Source: Federal Reserve Bulletin, changes in U.S family Finances from 2007 to 2013; Evidence from the survey of Consumer Finances

According to wealth distribution in America the survey was conducted in 2006 on American citizens based on net worth of financial incomes and house hold incomes where the most of white people had got 150 times more wealth than Latino and blacks. But there was drastic decrease in value of financial incomes for Latino in 2010 and black households which had got zero and rich had got 100 times more wealth as shown in two figures below. This was mainly resulted due to market failures and other income issues (Wolff, 2013).

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Source: From Wolff (2012). All figures adjusted to 2010 US dollars.

However while moving further graph below depicts us the house hold savings rate from 1946-2005 in average middle class families and poor families in which green colored markings shows normal persons income savings which can be calculated by difference between family’s spending and their income. Simultaneously green readings shows American people’s expenditure more than their savings.

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Source: solutions.powersimsolutions.com/Ranking/Historical Perspective

As result of these, upper class families had worked hard to consecutively double their wealth from 1983, and altogether middle class, poor families had started losing their wealth from 1990’s. Wealth inequality has created rise in costs of housing, education and increase in credit limit to most of middle class family and also inequality has resulted in, seeking low quality education and receiving low wages in company (Claire, 2015).

The CAUSES FOR WEALTH INEQUALITY

The wealth inequality is happening due to many reasons provided below:-

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Colonization

The migration of less skill labors from different undeveloped country which is making people to compete less with highly educated labors in manufacturing sectors which had resulted in increase of unemployment rates in USA.

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Improper taxation

This has endeavored towards causing major problems which created disparity between rich and poor wherein according to today’s tax regulations the rich is paying less taxes for example 15 percent and at sometimes there is no payment of taxes by rich when there is more return of assets from immovable properties and also because of exemption provide by government tax regulations.

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The Capitalism effects

The government actions towards free trade agreements has made inflow of more imported goods from undeveloped countries at cheaper prices and also due to offshore activities of large multi-national companies from USA to undeveloped countries because of their low wage incomes.

However this has resulted in large unemployment figures which had increased above certain limits.

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Fall of labor unions

The fall of labor unions have actively lost power of questioning unethical behaviors of companies exerted on labors in case of giving low wages or driving them off companies due to recession etc. also the lack of government support for labor unions has caused fall of labor unions in country which accompanies for increase of income inequality for thirty percent (Milanovic, 2011).

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Market Failures

The U.S economy has seen market failures with resulting in bankruptcy when the banks did not expect the repayment of loans with high interest rates from middle class and poor families who suffered from high debits. In mean while the U.S treasury was empty due to large spending o wars and other contracts involving nuclear deals with other countries (Demyanyk and Hasan, 2009).

COMPARISON OF INEQUALITIES BETWEEN OECD COUNTRIES

Wealth inequality is said to be present in all the countries around world. Fortunately some countries like Norway Denmark and Spain has shown lower rate of inequalities and dramatically the world’s most powerful country America has withhold more income inequality rate as per the Gini coefficient which is pointed further.

In countries like Sweden the governmental participation in grounds of economic re-distribution of GDP has made Sweden as an egalitarian country and is successful in protecting country from ongoing inequalities. Whilst United States make use of only smaller percent of GDP in economic re-distribution and perhaps USA government had to reduce the poverty through imposing taxes on top rich people and redistribution of GDP as well. But while looking for zero inequality countries, japan was most successful in eliminating inequalities through them permanently as indicated in figure.

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Source: Average income growth for OECD nations plotted against the difference between incomes.

ROLE OF USA GOVERNMENT TOWARDS INEQUALITY

Despite, USA’s federal government launch of several progressive income taxes, wealth re-distribution among rich and poor in the country had failed in solving rising inequality problems (Charles T, 2012).

The government had to come up with proper plan of spending tax and introducing certain fiscal policies which might be beneficial to middle and lower class families. However the adoption of long term fiscal policies might improve in eliminating all kinds

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