What is the trend in income distribution in the U.S. and how does it compare to other
developed or non-developed countries? What are the reasons and implications?
Aakash Patel
ACC 617
03/27/2018
Income inequality
Income inequality is at it’s highest level in OECD countries in the past 50 years. The
United States of America is the fourth highest income inequality when using the Gini
coefficient. The Gini coefficient is a statistical measure used in economics to measure income
distribution. This gauge’s income inequality and is on scale from 0 -1, with 0 representing
perfect equality and 1 representing perfect inequality. The United States has a Gini coefficient
of 0.39, while Mexico tops the list with a score of 0.459. Iceland has the most income equality
with a Gini coefficient of 0.246.
Since the 1970’s income inequality regarding individual or household income has
increased. This is largely driven by rapid income growth by those in the top income distribution.
From 1975 to 2015, the top fifth of income distribution rose from 10.3 times to 16.3 times
larger than the average household income in the bottom fifth of the distribution. From 2000 –
2015 the trend has been an increase in income inequality, but at a slower rate than in the past.
The lower income quartile consists of mostly black and Hispanic households, while higher
income quartiles consists of white and Asian households.
Economists have identified several factors that lead to the increase in income inequality
over the years. The first reason is that technological change, globalization, declining
unionization, and minimum wage fluctuations have curbed wages for lower and meddle income
workers. The second reason is the change in pay dynamics and social norms increasing the
wages of CEO’s. The third reason is that the inequality in financial wealth has led to income
inequality through in capital income that is generated by wealth. The last factor considered is
the increase of marriages between couples of similar earnings or education.
Chile has one of the highest income inequalities in the entire world, amongst developed
and non-developed countries alike. The richest 10 percent earn about 26 times more than the
poorest 10 percent. This problem stems from an ineffective and inequitable taxation system.
Not only does this increase income inequality, but this also creates a tax burden on the poor.
Along with this Chile’s economic inequality can be attributed to poor education. The majority of
the population does not possess the skills to obtain higher paying jobs. This is also the case in
