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Buildings in Rio de Janeiro, demonstrating economic inequality. Effects of income inequality, researchers have found, include higher rates of health and social problems, and lower rates of social goods, [1] a lower population-wide satisfaction and happiness [2] [3] and even a lower level of economic growth when human capital is neglected for high-end consumption. [4]
In 2008, the wealth gap in terms of percentage of total income in the United States between the top 1% and 5% was 7% and the gap between the top 1% and top 10% was 9%. This is an 11% reversal from the respective percentage shares of income held by these groups in 1963. Income inequality clearly accelerated beginning in the 1980s.
The study found the decline in progressivity since 1960 was due to the shift from allocation of corporate income taxes among labor and capital to the effects of the individual income tax. [ 106 ] [ 108 ] Paul Krugman also supports this claim saying, "The overall tax rate on these high income families fell from 36.5% in 1980 to 26.7% in 1989."
As of 2022, only 48% of renters owned any asset that might gain in value, such as retirement accounts, business equity, stocks and bonds, or other real estate not including their primary residence.
"These gaps didn’t spring up by accident. There were explicit policy choices in the past, like redlining and exclusion from investment,” said one economist.
[30] [31] The major cause was an increase in investment income. Capital gains accounted for 80% of the increase in market income for the households in the top 20% (2000–2007). Over the 1991–2000 period capital gains accounted for 45% of market income for the top 20%.
According to the Institute on Assets and Social Policy, for each dollar of increase in average income an African American household saw from 1984 to 2009 just $0.69 in additional wealth was generated, compared with the same dollar in increased income creating an additional $5.19 in wealth for a similarly situated white household. [93]
Global share of wealth by wealth group, Credit Suisse, 2021 Share of income of the top 1% for selected developed countries, 1975 to 2015. Economic inequality is an umbrella term for a) income inequality or distribution of income (how the total sum of money paid to people is distributed among them), b) wealth inequality or distribution of wealth (how the total sum of wealth owned by people is ...