Persistent income inequality makes for sluggish recovery

October 17, 2012 at 10:47 am 2 comments

As we’ve posted about before (here and here), the period after the Great Recession, despite being an official ‘recovery,’ has been one of low-wage job growth and growing inequality. As the incomes of the most wealthy Americans rebound, incomes of middle- and low-income Americans continue to erode.

Today the Boston Globe argues that it is this rise in inequality that is the major impediment to economic growth moving forward in years to come. Citing research by the International Monetary Fund, the Globe states that “in rich countries and poor, inequality strongly correlated with shorter spells of economic expansion and thus less growth over time.”

What is most troubling is that the recession “cemented” this inequality, rather than fixing it. The income and wealth gap, which had been growing for the past few decades, continues to grow.  But in order to achieve real, long-term solutions to our nation’s economic problems, the conditions that created this gap must be addressed. As stated by the Guardian earlier this year:

There is ample evidence that, especially in the US, households reacted to higher inequality by working longer hours, lowering savings, and increasing debt in an attempt to maintain their relative consumption status. Up to a point this allowed them to pay for medical bills, the ever-increasing costs of children’s college education and a house; but eventually the bubble burst.

Even the U.S. Congress Joint Economic Committee reported in 2010 that “income inequality may be part of the root cause of the Great Recession.” Reversing the inequality trend must be a part of any economic policies, or we will perpetuate the conditions that brought about the recession in the first place.

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Entry filed under: Economic Development, Economy. Tags: .

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2 Comments

  • 1. Rising cost of living fuels inequality « thesupportcenter  |  October 19, 2012 at 10:39 am

    […] on a paper out of Harvard University suggesting that the high cost of living contributes to the persistent and growing inequality that we blogged about on Wednesday. Low-wage workers are pushed out of the areas with the greatest […]

  • 2. Rural housing gap continues to widen « thesupportcenter  |  November 30, 2012 at 11:24 am

    […] the divide between rural and urban areas, that has characterized this economic recovery (here, here, and here). Reducing– or, in some cases eliminating–  funding for housing programs […]


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