Income inequality in the U.S. has surged near levels last seen before the Great Depression. The average income for the top 1% of households climbed 7.7% last year to $1.36 million, according to tax data tracked by Emmanuel Saez, an economics professor at the University of California, Berkeley.
That sliver of the population saw pay climb at almost twice the rate of income growth for the other 99%, whose pay averaged a humble $48,768.
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This is a problem because most Americans are still recovering from the Great Recession, and wage disparity is adding to the problem. The average income for the 99% is still lower than it was back in 1998, after adjusting for inflation.
Meanwhile, incomes for executives, bankers, hedge fund managers, entertainers and doctors have all steadily improved. This group accounts for roughly 22% of all personal income in the U.S.–more than double the post-World War II era level of roughly 10%.
This income disparity is thinning out the ranks of the middle class.
A defining economic challenge
President Barack Obama has called rising inequality “the defining challenge of our time,” and experts warn it may be slowing overall economic growth. Further, greater inequality has created a distrust of government and of corporate leaders.
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The result has also been a backlash against globalization that many Americans feel has tilted the economy against them. For example, factory workers currently compete with employees in countries such as China, India and Eastern Europe who work for multinational corporations, while middle-class pay is being depressed.
Social factors have also amplified the income inequality trend. Single-parent families are more likely to be poor than other families, and are less likely to ascend the income ladder. Finally, men and women with college degrees and high pay are more likely to marry each other and amplify income gaps.
Clinton and Trump’s views
Hillary Clinton has highlighted inequality in multiple speeches, with her positions evolving somewhat over the past year. She says she hopes to redirect more money to the middle class and the impoverished.
Clinton would also raise taxes on the wealthy, increase the federal minimum wage, boost infrastructure spending and offer the prospect of tuition-free college.
Meanwhile, Donald Trump has offered a blunter message about a hollowed-out middle class and a system “rigged” against average Americans. He has yet to emphasize income inequality in his campaign, but has pledged to bring back factory jobs that are long associated with the rise of the middle class.
To achieve that, Trump has promised new trade deals and infrastructure spending. But Trump has also proposed a tax plan that focuses on dropping the corporate tax rate and simplifying the tax code—as a result, he’d bring the lowest marginal tax rate up to 12%, from 10%, and set the highest as 33%, compared to 39.6%.
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