The Wealth Disparity In America Shows How Unequal The Nation Really Is
How It Happened
After World War II, the American economy experienced a steady growth as vehicle manufacturing took a turn for the better, and jobs were abundant nationwide. However, beginning in the 1970’s, economic growth slowed and the income gap widened, and has been increasing ever since.
the globalization hypothesis – low skilled American workers have been losing ground in the face of competition from low-wage workers in Asia and other “emerging” economies.
skill-biased technological change – the rapid pace of progress in information technology has increased the demand for the highly skilled and educated so that income distribution favored brains rather than brawn.
the superstar hypothesis – modern technologies of communication often turn competition into a tournament in which the winner is richly rewarded, while the runners-up get far less than in the past.
immigration of less-educated workers – relatively high levels of immigration of low skilled workers since 1965 may have reduced wages for American-born high school dropouts.
changing institutions and norms – Unions were a balancing force, helping ensure wages kept up with productivity and that neither executives nor shareholders were unduly rewarded. Further, societal norms placed constraints on executive pay. This changed as union power declined (the share of unionized workers fell significantly during the Great Divergence, from over 30% to around 12%) and CEO pay skyrocketed (rising from around 40 times the average worker’s pay in the 1970s to over 350 times in the early 2000s).
This chart is very intriguing because of the scale of the Mexican-born population in the country. With the number of Mexicans in the country increasing from aprox. 1 million to about 8 million in two decades, it is not surprising that there was a huge surplus of uneducated workers in America willing to do minimum wage work.
Along with the number of Mexicans being born in America during this period, the number of Immigrants that the U.S. brought in increased by 2.3% over the same two decade period. Although this doesn’t seem like a lot, at the time, this would have been an additional 5 million or so immigrants on top of the 8 million Mexican born U.S. citizens.
What can we do to fix this?
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