Inequality has remained a topic of discussion for a very long time. Recently, it has received even more public attention partly due to the global financial crisis caused by the COVID-19 pandemic.
However, inequality is a very broad topic. And therefore, when we discuss inequality, we need to decide which aspect of it we are referring to.
For example, for certain people, inequality is the lack of equal opportunities. For others, it may mean unequal outcomes.
Similarly, we also need to consider some other factors, such as mobility vs. stability. Another important question that arises is what is more important for people, the equal distribution of economic resources, or the well-being of everyone?
China is often given as an example of nations that successfully emerged from poverty and rose to the top. However, even in China, inequality has risen during the past four decades. So, a nation’s booming economy and its high GDP are hardly ever good indicators of the inequality in its economic structure.
The US, which has a 50 percent higher GDP than Denmark and Sweden, is far more unequal when compared to them because of their welfare systems. Moreover, for an individual living in California, disposable income seems to change quite frequently, hinting that richness and poverty are only temporary.
Taking all these factors into consideration, the data shows that since 1980, the wages for high-skilled jobs have increased significantly. When we compare this to low-skilled jobs, the wages have a very low growth rate, which indicates a clear bias towards high skilled and technology-dependent jobs.
Another interesting thing is that since 1980, inequality has increased in almost all developed economies. This means that domestic policy has very little role to play when it comes to inequality and labor’s share in national income.
Other indicators such as social mobility have slightly declined over the years. Still, the median income increased, and the wage gap was reduced.
So where does this leave the US? According to some experts, there is not much room for the expansion of the welfare system in the current economic structure and any forced growth will harm the economy.
However, by using the country’s resources more effectively and shifting dependency from the government to the market could improve things.