Free Essay SamplesAbout UsContact Us Order Now

Wealth

0 / 5. 0

Words: 1650

Pages: 6

48

[Name of the Writer]
[Name of Instructor]
[Subject]
[Date]
Wealth Inequality in the United States Perspective
Wealth inequality has increased sharply within the United States since the late 1970s. This inequality is due to a number of reasons which will be discussed in the paper. The gap within the wealth of different households in the United Stated had become quite severe since the times of the Great Depression.
The Concept of Wealth
Wealth can be defined as the current market value of all existing assets that are owned by the household nets as part of their debts. Also, assets can include all the financial and non-financial assets over which the right of ownership can be implemented and that facilitates different economic benefits to their owners. Another definition of wealth includes all the pension wealth that is held by individuals after their retirement and/or disbursementthrough life insurance companies (Saez and Zucman 5).
Surely, there is a notable difference between wealth and income. Income is quite commonly used to refer the amount of money generated over the period of time; however, wealth is a collection of owned assets.
Wealth Inequality
There is surely not a single dispute over the fact that the United States has been undergoing a severe rise in income inequality for the last four decades. In an article published on Washington Centre for Equitable Growth by Emmanuel Saez and Gabriel Zucman it is found that a “total income earned by the top 1 percent of families was less than 10 percent in the late 1970s but now exceeds 20 percent as of the end of 2012.

Wait! Wealth paper is just an example!

”(Saez and Zucmann.d.). A major portion of this very increase is a sudden upsurge of the incomes earned by successful entrepreneurs and senior company management.
Dissecting the Wealth Inequality Case
The graveness of wealth inequality can be measured by looking at the data provided as part of capital income that includes interest, dividends, rents and most importantly, business profit since 1913. For doing so, the paper will rely mostly on the working paper of Saez and Zucman.
Return of Wealth Inequality and the Roaring Twenties
Wealth inequality has followed quite a similar “U-shaped evolution” during the last 100 years (Saez and Zucman 22). It can be observed from the Great Depression during the 1930s until late-1970s. A massive democratization of wealth is also observed. This trend has afterwards inverted having the share for total household related wealth owned solely by the 0.1% top wealth owners shows escalation towards 22% in the year 2012 as depicted in the late 1970s. Saez and Zucman (22) has also observed that “the top 0.1%—160,700 families with net assets above $20 million—owns 22% of total wealth, about as much as the bottom 90%.” having a total net assets around $20 million at the end of year 2012. Figure 1 in appendix A shows a detailed representation of wealth distribution among families during 1913 to 2012.
During the recent decade, only a minor component of the American population has seen their wealth share to grow; however, the share of wealth of the top 0.1% has escalated quite much in the last four decades. The trends of 1978 has observed that the 0.01% of the “wealth holders were 220 times richer than the average family.” (Saez and Zucman 23). However, the families who are not merely rich and do not fall in the top 10% have suffered a minute decrease in their wealth during the last four decades.
Middle Class Wealth – Rise and Fall
On the other side of the picture, the major enhancement in wealth is a result of the attritionof wealth from the poor and most importantly, the middle class. This group comprises of the bottom 90% of the wealth share group. This group has faced better wealth prospects since 1920s due to the inclusion of different programmes of ease in home ownerships and pension systems. From the studies, it has been found that the wealth comprising of the lower 90% of American families have gradually increased from around 15% to 36% during mid-1980s. However, it has faced substantial decline after that period. By the end of year 2012, the lower 90% has owned less than 23% of the total United States wealth quite similar with the year 1940 as depicted in figure 2 in appendix B.
Surprisingly, a very same trend is also observed in the lack of difference in year 2012 and 1986. Surely, middle class’ wealth has not recovered from the financial crisis because of there has quite a minute decrease in 2012 as compared to 2009. Despite having an average growth rate of around 1.9% per year, the bottom 90% United States family’s wealth has not grown remarkably during the period of 1986-2012. This situation is quite contradictory to the dynamics shown by the average wealth of the top 1% whose wealth has grown three-fold from mid-1980s (approx. $5 millions) to 2012 (around $14 millions) (Saez and Zucman 24-25).
The Newly Developed Wealth Divide
The ever-growing indebtedness of majority of American citizens is the core reason behind the attrition of the bottom 90% wealth share of the American families. Most of the middle-class families have the privileges of pensions and own their homes; however, they have to pay a massive amount of mortgages for repaying. Moreover, the student loans, tuition fees and consumer credits are also quite higher than before. For a specific period of time, the rising indebtedness is offset by the enhancement in market value of assets belonging to middle class families. This enhancement in the average wealth of lower 90% of the American population was observed during the “stock-market bubble” during the late-1990s along with “housing bubble” in during the early-2000s. Neverthless, it has suffered a severe collapse before and after the Great Recession during the years 2007 to 2009. Figure 3 shows the developed wealth divide in the United States families from year 1946 to 2012. The very trends clearly depicts the enhancement and declination of top 1% and bottom 90% of the wealth.
Since the recent development of housing and financial crises occurring in the late 2000s, the wealth recovery of middle class families living in the United States has not been observed. The average wealth of the lower 90% of the American families was equal to $80,000 in year 2012 and it is quite coherent to the year 1986. In contrast to it, the average wealth has become three times for the top 1% for the American wealthiest families. Even the Great Recession has proved to be a minor bump as witnessed from the ever-growing trajectory as witnessed in figure 3 (Saez and Zucman 17).Causes behind Wealth Inequality
There are quite a limited number of primary causes that has created and retained wealth inequality in American society. It includes financial resource allocation, monetary policy, higher rate of saving and wealth accumulation in top 1%, enhanced rate of returns on assets owned by top 1%, inflation, tax policy and declination in unionization and lower credit constraints and credit costs by top 1%.
Under the mentioned conditions, the top 1% controls the financial opportunities thereby allowing them to derive the financial revenues. Similarly, the earning gained by investment in stock markets is quite commonly reinvested to enhance the profits. On the other hand, the bottom 90% does not have that many resources, their “poor families are constrained to spend the remaining income on items that will not produce wealth and will depreciate over time.” (Hurst 41).
Escalating Wealth Inequality – Implications and Solutions
Considering the future following the very same trend, it would imply that the wealth inequality will stay quite high thereby leading towards the savings of the top 1% considerably highly than their bottom 90% counterparts. Similarly, one or two decades from now on, most of the gains as part of the democratization of wealth achieved during the post-war decades could surely wither and subsequently, lost. Under these conditions, the rich would become richer and common families would possess almost nothing having debts as much as their valuable assets. A very same concern is also raised by Piketty and Goldhammer(430-453) that has warned about the inherited wealth can become a demarcating line for the people that have and the people that have not in the 21st century. Surely, as part of this implication American would face a severe deterioration in decline of its ideal principles of endless opportunities for all.
The best way to stop this damaging condition is to formulate policies that can diminish the wealth concentration among the top1% thereby preventing the conversion of self generatedwealth into the inherited wealth. It would enhance savings prospects among the middle class families. The first and foremost perspective in this regard is that the preferential capital income tax rates in contrast with income aresubstantially difficult to defend under the influence of ever-rising wealth inequality. Another method is to enhance the estate taxation for preventing the self crafted fortunes as part of inherited wealth. Income taxation and progressive estate have proved to be the two most viable sources for maintain the wealth’s concentration right after the Great Depression. Surely, those tools can be proved useful under current economic scenario.
Furthermore, targeted policy reforms can also play their part in rebuilding the wealth of middle class. Incentives that can urge the bottom 90% to save a substantial amount of money can help enhance their saving and most importantly, quality of life. It also includes the formulation of boosting the daily wages (income) of the bottom 90% of the workers so that they can afford much better in order to save.
Another better reform includes the needs of policymakers for enhancing collection of relevant data related to wealth distribution within the U.S. Information related to the equality of wealth and savings data should have to be published as part of consensus (Saez and Zucmann.d.).
Conclusion
All in all, wealth inequality is a major menace that the United States economy has been facing during the last four decades. It has brought about several negative implications on the United States economy and is supported by a number of causes. A number of solution that can be implemented in order to prevent further deterioration of United States economy and quality of living of middle class and poor citizens.

Works Cited
Hurst, Charles E. Social inequality: Forms, causes, and consequences. Allyn & Bacon, 1998: 41
Piketty, Thomas, and Arthur Goldhammer. Capital in the twenty-first century. Belknap Press, 2014: 430-453
Saez, Emmanuel, and Gabriel Zucman. ‘Exploding Wealth Inequality In The United States – Washington Center For Equitable Growth’. Washington Center for Equitable Growth.N.d., 2014.Web. 24 Apr. 2015.
Saez, Emmanuel, and Gabriel Zucman. Wealth inequality in the United States since 1913: Evidence from capitalized income tax data. No. w20625. National Bureau of Economic Research, 2014: 1-40

Appendix A: Economic Graphs Depicting Wealth Inequality

Figure 1: Wealth Distribution in Families (Retrieved from equitablegrowth.org)

Figure 2: Middle Class Wealth during 1917-2012 (Retrieved from equitablegrowth.org)

Figure 3: Difference in Newly Created Divides among Top 1% and Bottom 90% (Retrieved from equitablegrowth.org)

Get quality help now

Top Writer

Alton Sloan

5.0 (251 reviews)

Recent reviews about this Writer

I have ordered a college case study from this company, and I’m on cloud nine! It is written in an extremely professional manner, doesn’t contain any mistakes, and is just perfect. Thank you for saving my grades!

View profile

Related Essays

Family member causing shame.

Pages: 1

(275 words)

Maths Term Paper

Pages: 1

(275 words)

step1

Pages: 1

(550 words)

Business Investments

Pages: 1

(275 words)

Military Rhetorical Essay

Pages: 1

(275 words)

Rhetorical Analysis

Pages: 1

(275 words)

Policy Proposal

Pages: 1

(275 words)

The Work of the Holy Spirit

Pages: 1

(275 words)