U.S. Income Gap May Slow Jobs Growth
October 17, 2012 by UPI - United Press International, Inc.
WASHINGTON, (UPI) – The widened gap between the wealthiest Americans and the rest of the nation portends slower economic and job growth, analysts say.
“Growth becomes more fragile” in countries with high levels of inequality such as the United States, Jonathan D. Ostry of the International Monetary Fund told The New York Times.
Ostry’s research suggests the widening income disparity since the 1980s might limit the nation’s economic expansion by as much as a third, the Times reported Tuesday.
Concentrating income in fewer hands could translate into less stable economic expansions and anemic growth, Ostry and fellow IMF economist Andrew G. Berg contend.
The newspaper said the top 1 percent of U.S. households earn about one-sixth of all income, and the top 10 percent take in about half. That’s the largest gap since the Great Depression.
The first full year of the recovery also was kind to the wealthiest Americans, with the top 1 percent raking in 93 percent of income gains, the Times said.
IMF economists see this as a serious problem.
“Some dismiss inequality and focus instead on overall growth — arguing, in effect, that a rising tide lifts all boats,” a commentary by IMF economists said. “When a handful of yachts become ocean liners while the rest remain lowly canoes, something is seriously amiss.”
The Organization for Economic Cooperation and Development this year warned the income gap could bring “negative consequences” and suggested changes to tax and spending programs to address it in a meaningful way.
“What worries me is the idea that we’re in a vicious cycle,” said Joseph E. Stiglitz, a Nobel laureate in economics. “Increasing inequality means a weaker economy, which means increasing inequality, which means a weaker economy. That economic inequality feeds into political economy, so the ability to stabilize the economy gets weaker.”