Income Gap

views updated


In the United States, as in every nation, an income gap exists between the rich and poor. Income levels predict the ability to purchase goods and services. Economists analyze the distribution of income by ranking all family income levels from highest to lowest, then dividing the levels into fifths, 20 percent of families in each of five groups. (The same numbers of households are in each fifth.) The range of income for each fifth is then determined. In 1998 the lowest fifth's income ranged from $0 to $15,102, and their total income represented 4.6 percent of the entire income of all households in the U.S. That same year the highest fifth's income range was $55,907 and above. Their total income represented 44 percent of the entire income of all households.

In 1947 the lowest fifth received 5.1 percent of the entire income of all households and the highest fifth, 44.3 percent. Although the incomes of all families increased through the years, these figures illustrate that the income gap between the poorest and the richest, in percentage of all U.S. household income received, changed very little. Individuals at the lowest levels generally fall into the following categories: minorities, the elderly, young wage earners, households headed by women, urban low-income-housing residents, and the rural poor.

Various factors, including education, inherited wealth, ability, experience level, and discrimination, contribute to the unequal distribution of income or the income gap. In addition, a self-perpetrating condition known as the cycle of poverty traps many individuals at the lowest income levels. People born into slums in large cities are likely to remain there the rest of their lives. High crime, poor living conditions, limited educational opportunities, and lack of adult role modeling all contribute to the perpetuation of the cycle. Wealthy families are more likely and able to send their children to expensive universities and thus help them obtain high-paying jobs.