The Great American Income Gap Widens More In 2015

The Great American Income Gap Widens More In 2015

Today in 2015 the gap between the wealthy and the middle class and the gap between the middle class and the poor is widening even further. The affluent today can spend more and save more while the rest of the population is severely constrained. In the past Americans could easily leverage the value of their homes or other real estate for financial leverage but the leveraging of home values has sharply declined post recession.

Pre 1970s the United States the income distribution was relatively more steady. Households saw real gains yearly with their purchasing power as the economy grew stronger. People with higher education saw greater increases in income and higher education had a more realistic cost back then versus the rising and exorbitant costs of an education today. ironically the rising costs of education are in part due to the very thing that was created to help curb the costs of education, government funding and grants to colleges. Colleges started to increase their spending on unneeded programs and incentives to offer students and colleges soon found out that the more they offered the more they could charge. This of course coincides with the fact that since the 1970s the amount of adults with a university degree has declined. So where do we go in 2015? While some like the author here from believes you can still be debt free and prosper in the new year, the stark reality is that getting ahead with ones personal finances has never been more challenging as the 1% continue to see their wealth grow while middle class earners are on the decline.

Yet the demand for workers with a college education or skill sets that require trade school or other degree has steadily increased year after year. Yet less people were seeking degrees. At the same time people with less education saw their wages sit and stagnate. Politicians fight minimum wage increases every time it is brought up. Meanwhile those with a higher education see their wages rise. For those trapped with stagnating wages saw their purchasing power further decline with rising inflation and a Washington D.C whose politicians are in big industries pocket books and bank accounts to raise minimum wage to meet inflation. Thus both income distribution both purchasing power have became more skewed.

In the past these Americans with lower income could take advantage of real estate values which had risen and were rising precipitously. This allowed millions of Americans to leverage the increased value of their property. The side effect of this is that while it allowed greater consumption it also meant these same Americans were taking on more debt while their incomes remained stagnant. These Americans trapped in lower incomes helped to further fund the wealthy and then became trapped into more debt.

What is different between now and then? Well between 1949 post world war two and 1979 the bottom 20 percent of the poor and lower middle class saw their income increase by 20 percent, while between 1980 and today the bottom 20 percent has only seen an increase of 3.5 in income which does not even come close to matching inflation. Companies back then used to give raises and wages that were livable. Today greed is the number one factor. The only way out is a higher education that today comes at a staggering cost and a cycle of debt.

Also today the value of homes has decreased. Since the recession millions of homes have mortgage debt that far exceeds the equity and value of their homes. That being said a majority of Americans can no longer leverage the value and equity of their homes for increased spending power. This in turn means that less money is being spent and pumped into the economy.

Like a good article posted at states, Americans today have two choices, pursue a higher education and assume massive debt over it, or start work right out of high school and accept living at a minimum wage that will never rise with inflation. A third possible option is those with lower incomes making smart investments but that is hard to do with a lower income.

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