Income Inequality Essay, Research Paper

Income inequality in the United States remained relatively stable for a period

of nearly forty years. Beginning in the 1970?s, however, this period of

stability ended, as the first signs of widening income inequality became

apparent. Over the course of the 1970?s and 1980?s, an increasingly clear

trend toward greater income inequality emerged. By the end of the 1980?s, the

top 20 percent of workers were receiving the largest share of income ever

recorded by government figures, and the bottom three fifths were receiving the

lowest shares ever recorded. This trend has continued into the 1990?s and

currently shows no signs of decline. When the indicators of growing inequality

were first observed in the 1970?s, some researchers argued that the effects

were merely temporary artifacts of short-term labor market disturbances. By the

end of the 1980?s, however, a long-term trend towards increasing inequality

had clearly emerged, pointing instead to inflexible changes in the occupational

structure itself. The new occupational structure appeared to be one with an

increase of well-paid technical, scientific, and professional jobs at the top, a

?sliding? middle class, and a growing poorly-paid service and retail jobs at

the bottom. Several important labor-force changes appeared to be contributing to

the shifting occupational structure. As occupational reconstructing and growing

income inequality became increasingly evident, a heated debated as to the causes

and magnitude of these changes arose. Two dominant bodies of thought emerged

around the issue: the ?job-skill mismatch? thesis and the ?polarization?

thesis. Mismatch theorists argue that there is an increasing distance between

the high skill requirements of post-industrial jobs and the inadequate training

and mediocre qualifications of workers. They see the post-industrial economy

leaving behind unskilled workers, especially women and minorities. For the

mismatch theorist, the trend toward greater inequality is temporary and will

dissipate once the supply of workers acquires the skills demanded by a

post-industrial economy. And they predict that the overall distribution of

workers will experience and upgrading in their wages over the long run.

Polarization theorists, on the other hand, believe that the rise in inequality

is permanent, a result of the shift to a service-based economy. This vision of

the post-industrial economy is characteristically polarized. The problem

according to these theorists, is the type of jobs being generated in the new

economy, not worker attributes. Because they believe the causes are structural

and permanent, polarization theorists would deny the efficacy of public policies

designed to educate and train unskilled workers. They predict a long-term

continuation of the trend towards increasing income inequality. Studies show

that the long run increase in income inequality is also related to changes in

the Nation?s labor market and its household composition. The wage distribution

has become considerable more unequal with more highly skilled, trained, and

educated workers at the top experiencing real wage gains and those at the bottom

real wage losses. One factor is the shift in employment from those

goods-producing industries that have disproportionately provided high-wage

opportunities for low-skilled workers, towards services that disproportionately

employ college graduates, and towards low-wage sectors such as retail trade. But

within industry shifts in labor demand away from less-educated workers are

perhaps a more important explanation of eroding wages than the shift out of

manufacturing. Also cited as putting downward pressure on the wages of

less-educated workers are intensifying global competition and immigration, the

decline of the proportion of workers belonging to unions, the decline in the

real value of the minimum wage, the increasing need for computer skills, and the

increasing use of temporary workers. At the same time, long-run changes in

living arrangements have taken place that tends to provoke differences in

household incomes. For example, divorces and separations, births out of wedlock,

and the increasing age at first marriage have led to a shift away from

married-couple households and toward single-parent and non-family households,

which typically have lower incomes. Also, the increasing tendency over the

period for men with higher-than-average earnings to marry women with

higher-than-average earnings has contributed to widening gap between high-income

and low-income households.