The Rich Verses the Poor in America Contents

TheRich Verses the Poor in America

Contents

Introduction 3

Analysis 3

Wealth Inequality by Race and Ethnicity since 2007 4

Average Federal tax Rates by income group from 1979-2010. 5

Income redistribution 7

Decline in middle class income 8

Income mobility 10

The recession 11

The rich poor desperation 12

Conclusion 13

Recommendation 14

References 15

Introduction

Thereal gross economic product (GPP) in the U.S increased at the rate of5.0% in the quarter of the year 2014. This was a positive mark forthe industries groups that marked 20% of the raise. This contributionwas due to government services, industries, finance, mining, rentaland real estate’s business. The U.S in the past three years hasshown an increment in economy with the unemployment rate going downsteadily. The job creation marked 15500 jobs in December withunemployment percentage of 7.8%.However, to bring the unemploymentrate down the U.S government has to create 300,000 new jobs eachmonth in an attempt to bridge the gap between the rich and poor.However, it is evident that the poor are getting pooere as the richget richer.

Analysis

Themenace of inequality has gained attention from the economist andpolicy makers over the uneven gains got after the economy recovery.Reports from Thursday Fed report said that the disparities in theincome since 2010 increased even after recession .The income rose in2010 for the white households and non Hispanic. From the expert pointof view the wealthy inequality gap has widened over time with the top3% getting 54.4%of wealth in 2013 up to 44.8% in 1989.90% incomeholders had 24.4 increase of income in last two years. The assetsowned by Americans increased rapidly in 2010 but the ownership ofassets, reticent accounts dropped in 2013.The rise and fall ofincome has effects on the poor is gross in that there is no stableincome hence making them more poor and poorer(Smiley, 2012).

WealthInequality by Race and Ethnicity since 2007

SourcePew Research

Technologyhas made the work of most Americans easy with most jobs being done bymachine. However, technology is double edged sword in that the mostjob that were done by the unskilled laborers and the middle classpeople in the U.S has been replaced by machine rendering most middleclass jobless. This effect has seen most middle class suffer sincethey have no income hence remaining poor. On the other hand,technology has been a boon in sectors like engineering, law andtechnology in that it complements the high skilled workers hence thehigh skilled workers who are the rich have remained in their classwith their counterparts losing jobs due to technology.

Thetax rate structure has been falling and rising in the past 60 years,this has lowered the tax rate from36.9 to 35%. The effects of lowertax rates is that the rich take home more income than the middleclass people hence the gap keep getting wide. The capital gains atthe end of 2012 was 25% from 20% on the 1990s.the profit gained fromselling real estate, stocks and assets kept rising and falling withthe people at the top getting mere gains. In 2006, the top 1 percentwas 38% capital gain which increased from 31% in the last ten years.

AverageFederal tax Rates by income group from 1979-2010.

Source:The Congressional Budget Office.

Thesimple mathematics here is that when the higher capital gains combinewith lower tax rate the rich goes home with more income than thepoor.

Thefiscal debate on the tax hike has seen the rich being taxed morecompared to the poor. The middle class people pay tax of $600 to$1,200 in a year. Tax increase in the U.S is always armed at the richbut sometimes the poor families are included. The equal tax paymenthas made the gap between the two classes increase rapidly. The policymakers are happy with the annual inflation that is between zero and2%.the prices of common goods have risen slightly over .for example,1.8% over the past 12months.

Householddebt and credit card debt have remained low since the recessionperiod. However, students’ loan repayment has been low since theyhaven’t secured well paying jobs.

Thereal estate market has continued to improve this means unemploymentrate will go down. The gas prices are still higher due to theincrease in prices of the oil since recession. The slow growth andlow inflation in stock market will see the blue chips gains a lot inthe preceding years. The economy of the U.S can be said to beimproving though this can be hindered by the domestic problems andinternational risks. The war between U.S and Iran has made the priceof oil to increase due to the instability of the Iran government. Theincrease in the price of oil has influenced the price of othercommodities. The unemployed lot and the poor this has negativeeffects on them simply because all house hold commodities are goingto hike. On the other hand, the rich progressively become richerwhile their counterpart becomes poorer in the U.S.

Therecovery of the U.S economy for the past years has not improved theliving standard of the poor. The gap between the two classes haswidened with some not even having access to clean water and basic aneeds. The income is the measure of affluence in most countries whichcan be viewed differently according to the context. The upper middleclass in the U.S earns 77500 annually while the employed lots theirearnings increased from $32,000 to 39,000 these are people of agebrackets between 22 to 65.The unemployed and the poor in America maybe poor according to U.S standard but rich in other countries withlow standards. According to the census bureau a family is poor if itspretax income is lower than the poverty threshold.

SourceUs Census Bureau

Theunemployed and poor earning range from$11,344 to 10,458 annually withages ranging from 24 to 66.In the past ten years poverty and incomedata has greatly affected the U.S households. The employment sectormarked some improvement in the late 2007.The great recession howeveraffected this improvement in the year 2008 to 2009 with unemploymentincreasing around 2010 and 2012.the full time employed people earned$29,261 to 38,548 then this stagnated for a while with earningstanding at $51,668 to 50,323 in the past ten years.

Incomeredistribution

Theincome redistribution in the U.S increases d from 8.4 to 17.4 ascompared to the decrease of 4.2 to 3.2 percentages among the bottom20 percent of the income earners. High percentages of Americans haveexperienced stagnation and wage falling since 2000 though theirproductivity has been increasing. The wage has seen a growth of 200%with the wealth people taking home more cash. The rich saving rose inthe 1960s to date to the one-third of their income saving thatgenerate interests regularly. The rest who can barely pay the billsand survive most on loans that are highly taxed remain below povertyline for a long time hence the widening of the gap. The pension paidto this class cannot cater for the mortgage, education and housingbills that are mandatory to pay therefore the little they get fromearnings is deducted all the bills hence remaining with little ornothing. It’s clear the poor class just makes money enough to caterfor basic needs and nothing is left to save like their counterparts.

Themiddle class income is stagnant while the financial problems havebecome more due to the changing economy, social unrest, ridinginflation and government policies that impose high tax oncommodities. The rich capitalist are becoming wealthier causingdivision in the world with 7.2 billions of them controlling theassets and wealthy. The social economic income inequality and greedhave brought differences among the people of different social class.

Declinein middle class income

Inequalityhas become a major problem in the world with most high percentage ofpeople access to basic needs like clean drinking water becoming hard.The rich are increasing their wealthy day and night at the expense ofthe ordinary people. Tampering of the free market system by thegovernment in favor of the redistribution programs that are aimed atreducing inequality has not been fruitful. In addition, examiningfactors that surround income inequality and income mobility isimportant before a rush decision is made. Researchers from Harvardand Chulalongkorn University analyzed the Americans perception of thegap between the poor and the rich. The respondents of the researchunderestimated the gap between the two classes. For example, theration of CEO to the income is roughly 30 to 1 and in reality its 350to 1.The inaccurate belief about the gap is the reason for theeconomy inequality that has become a political issue (Haymes &ampMiller, 2015).

TheObama regime has serious racial inequality that’s mingles withgovernment abandonment of the poor class. People were so dissatisfiedwith the government policies and politics these was evident withmiddle class and poor in 1970s planning to turn against the statusquo. The social justice advocates wish the arbitrary and subjectiveabstraction of fairness distributed equally. This advocate ignoresthe incentives that make workers more productive. Taxation andredistribution can make us worse according to researchers who arguethat social justice makes the whole country suffer on behalf of thepoor.

TheU.S department of the treasury holds that the income of the 10%population rose from 31.7% in 1960 to 44.3% in the year 2005. Thehigh class their income raised from8.4 to 17.4 in the same year, thismeans the share of the national income decreased for the peopleearning less hence the rich continue adding their wealthy. However,this statistics looks at the glimpse side of the story and treatingeconomy like stagnant with no growth. A keen look at this assumptionis that economy is single cake dived among the people each year. Inthis consideration the rich take the bigger cake home. The realeconomy is dynamic with systems that grow over years. The US GDP hasincreased with time even with 2007 to 2008 recessions it has hit $15trillion according to the World Bank statistics. The reality of theeconomy here is that the poor are getting rich thought at a tortoisespeed. Research done by the U.S census bureau indicates that a growthof 19.3%of income earners and 69.7% of quintile were marked in theyear 2009.

Incomemobility

Theability of an individual to move upward in income class has been anissue in most parts of America. The income mobility is the corefactor in upward movement of any person. With increase in incomemobility the living standard improve automatically. The increasedincome mobility in the years 1996 to 2005moved so many Americans intoa higher level of in income gain. The lowest earners moved to higherincome level this marked fairness in the free market. The inequalityfactors drives our society in that there is an incentive to work hardand reach to level of higher income earners .It is a free societywhere to work hard at will and leap the benefit of higher incomeearners. For example, the earners should work more to raise theyliving standards hence improve the poverty declination in thesociety. Investment, innovations and savings are key factor for oneworking hard and becoming rich (Iceland, 2012).However the protestsare the young generations with less experiences to propel them tohire income earners this make them to admire the top achieverswithout looking at their past hard work, persistent and workexperience. On the other hand, the expert asks where the youth willget experience if they are not offered jobs. How are they going toshoot in the top ladder if the jobs are given to those only withexperience? So the poor people will remain poor as long as noopportunity is give to them to gain experience and get more income.

Therecession

Financialcrisis that has heightened inequality among the poor and the rich,the 2008 financial crisis hugely affected the ordinary people, theylost homes and their jobs threatened due to dodgy mortgage business.Researcher has shown the number of millionaires in the world hasdoubled since the financially crisis creped in the year 2009.Thebenefits of economics growth hasn’t been shared with the majorityhence the disparity in classes. According to the bank of Englandchief economist the number of women while giving has risen due tolack of proper facilities and higher percentage of children aremissing basic education .Further study indicates that there 16billionaires in sub Saharan Africa where most people live in adverse poverty .

Theincome concern inequality is worse in the U.S with the public concernto address the issue becoming less. The U.S income inequality can becompared to other developed countries but in between taxes andtransfers apply. The incomes inequality has greatly influencednegatively and economics growth reduced financial, crises.

Decliningof work force cheaper laborers aboard as well as advancingtechnology high risen of subs less among the poor people make them to continually become poorer they lack competitions andautomatically that is widely present among the rich. This has madebasic needs to be like a nightmare to afford. The students enrollingcolleges have increased in high percentage (Gelman, 2010).Thereforethe gap between the rich and poor widen daily. The working povertyrate in U.S has remained somehow constant over years .Howeverscientist argue differently that low proportions of workers facefinancial hardship .The shift manufactures based services has seenthe workforce goes down drastically with poor being affected sackedfrom the jobs.

Therich poor desperation

Thegap between the rich and poor in American widens even as U.S economyrecovered after the recession .The is little or no change in averagemoney taken home by the poor. The average income being 4% from 2010to 5% in 2011 with most .majority of American families owned assetslike car and houses but this decreased in imposition houses of tax inthe year 2013.

Tradeunions accused the government not paying the works well and thisprompted a mother strike in to increase their wages. The wagestagnation has affected the economic recovery of the US and this sawan adverse affects in the future prospects of the US. The unskilledworkers have a choice of low or no pay this low pay has still seenthe gap widens more. The labor administration also has role to playthe widening gap. The labor administration was characterized ofinequality that made the figure and wages stagnant for long time. Thenumber of people getting wage of $6.08 rose steadily in America andother countries. The rise in the wage meant that the rich get moreincome and less tax pay (Edelman, 2013).

Theanti free markers and programs that had been there since last halfcentury has disadvantaged the poor and favored the politically wellconnected people and the rich. Although, this policies have affectedthe overall state of the poor their living standard is bettercompared to 40yeras ago. The wage in America is determined by thecapitalist market, the supply and demand in this market alsodetermines the wages. For example, where there less workers willingto do a job at given time then the supply will be low.

Conclusion

U.Sis a country with million poor people yet it’s a country that hasthe good job opportunities and medical services. The rich pay smallerincome taxes in comparison with the poor. Affluent wealthy in US isconcentrated at the upper class with the poor becoming poorer. Therehas been for a long time heated debate on the inequality in Americatoday but the debate has born no fruits. However, the government canreduce the gap between the poor and the rich by public education toincrease skilled labor and cut down the income inequality.Progressive taxation where the rich are taxed heavily as compared tothe poor has decreasing the income inequality. Wage legislation isanother initiative that can raise the income of the poor. The pricesof basic commodities can be subsidized to make the affordable toeveryone. The trend of the rich becoming richer can be resolved by:public education, investing in human capital and financial literacy.The uneven allocation of resources make the poor remain poorer andthe rich take advantage of their economic wealth and opportunities tobecome richer

Povertyis not stagnant for the people willing to put extra efforts in theirday today. Study shows that only 5% of those in extreme povertyremained there in 1991, they moved upwards the ladder of the incomedistribution. In addition, three out of the lowest paid moved to thetop ladder by 1991 with those poor in 1975 earning $27,745 by1991.this simply meant that the poor are get rich the same as rich.

Recommendations

Raisethe minimum wage today wage is slow that it’s not possible todepend on the wage .there several people who can’t pay their billsyet they are employed. Raising the wage to a minimum amount will seeto it they can afford basic needs

Taxingthe rich a fairly the rich taxes are so low compared to theiremployee and the poor. For example a secretary to the boss is taxedmore than the boss. It’s evident that the rich evade high taxesthat can be used to fund programs like education. Americans shouldpay a fair tax regardless of the social status.

References

Edelman,P. B. (2013).So rich, so poor: Why it`s so hard to end poverty in America

Gellman,A. (2010). Redstate, blue state, rich state, and poor state: Why Americans vote theway they do.Princeton, N.J: Princeton University Press.

Hayes,S. N., De, H. M. V., &amp Miller, R. J. (2015). TheRutledge handbook of poverty in the United States

Iceland,J. (2012). Povertyin America: A handbook.Berkeley: University of California Press.

Smiley,T., &amp West, C. (2012) Therich and the rest of us: A poverty manifesto.New York: Smiley Books. Poverty in the United States.