Income inequality in the U.S. just hit a 50-year high — here’s how we got here.
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In finance news and current events today, economy inequality has reached a 50-year high in the U.S. Money tips alone might not help improve your wages. Here's how we got in this situation.
In the ‘80s, the government started tracking all of the income being created across the U.S. So it began tracking wages, rents, interest income, and more.
Fast-forward to 2019, and we’re seeing that the distribution of income across the U.S. is more unequal than it has ever been.
One contributing factor is demographics.
Right now baby boomers are nearing retirement. In theory, this group has had their entire lives to build up wealth.
So they’re retiring, they have a savings, and they have more interest-based income (like investments) than us millennials. Many of them are within their “peak earnings” stage.
And then we have their children (us) who are still new to the workforce. And many of us have entered with entry-level salaries and outstanding debt like student loans. Housing costs are also higher now than what our parents had at our age. In other words, this group is NOT at their peak earnings level.
So we have these two cohorts of people at the top of the income distribution and at the bottom of the income distribution which could be driving this income inequality.
Then there are economic factors that also play a role.
The federal minimum wage of $7.25 an hour isn’t rising fast enough in a fast-growing economy. And while some local and state governments have raised their minimum wages higher than $7.25, the federal government hasn’t raised it since 2009.
There are still 17 states that are tied to the federal minimum wage. In those cases, a full time worker could still only be paid $15,000 a year.
Another contributing economic factor is that unions have basically vanished.
In 2018, only about 10% of U.S. workers belonged to unions. That’s the lowest rate it’s ever been since the bureau began recording statistics in the 1980’s. Unions used to be more common in previous economic eras. They use methods like collective bargaining move more money from companies into their workers’ pockets.
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