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Understanding Wages in America – Why the Rich Get Richer

February 8, 2012

wages in America

When we finish school or we graduate from university, most of us are starting our lives with very little in terms of material and financial wealth. Yes, countless young adults get a substantial start in life because their parents are wealthy, but for the overwhelming majority, things are very different. With this in mind, have you ever sat down and thought about the actual irony regarding the wage system, not on in the United States, but internationally as well?

Irrespective of what qualifications we have, most of us have to start at the bottom of the ladder in terms of wages. This of course is at a time in our lives when we really are in need of some serious money to buy our own transport, and ideally, also a home of our own. In a nutshell, those who are in the age group requiring the most money are in fact the ones earning the least amount of money. By the time you reach your sixties, when you already have everything you need, you end up earning a better wage than ever before. Life would be so much easier if this scenario was reversed, thus allowing us to earn a decent wage at a time when we need it the most. Unfortunately, however, that’s just not how life works, and it’s one of the reasons the rich keep getting richer.

Did you know that the top 1% of people, based on financial wealth, actually saw their fortunes increase by a staggering 275% between 1979 and 2007? In contrast, the financial gains amongst people considered to be poor only rose by 18% during the same period of time. To put this in perspective, let’s just say that the after tax income of the top 1% had more than doubled by 2007.

I won’t attempt to list exact figures here as far as actual earning are concerned, but you can be rest assured we’re looking at billions, if not trillions of dollars. This is money that in a sense is no longer in circulation. It’s owned and managed but the top 1% of Americans, which of course means less money has been distributed amongst other income groups.

Surely, this trend cannot continue indefinitely without it resulting is some dire consequences? Already we are seeing very visible signs that people want to see wealth being distributed realistically. All the recent protests, such as Occupy Wall Street for example, bear testimony to the way an increasing number of people are beginning to feel.

Quite often, people earning millions of dollars per year are actually taxed at a lower rate than ordinary middle-class income earners. President Obama wants to see this change, and has recently floated the idea that people who earn more than one million USD per year should be taxed at the same rate as middle income earners.

As is to be expected, this proposal is being fiercely contested by those that stand to be affected, should the proposal become law. Some say they deserve to be taxed at a lower rate because they routinely take risks which could easily see them lose a considerable amount of money, and that even with a lower tax rate; the government still gets more tax from a very wealthy person than it does from a middle class earner.

Others, many of which no doubt have vested interests, argue that such a law would likely result in a class war. They say it’s akin to stealing from the rich in order to help the poor, and this could possibly cause a great deal of resentment.

Even it tax rates are adjusted in order to tackle the current inequality of wealth distribution; the rich will continue to get richer. With effective measures in place, the poor might not get poorer, but their wealth will almost certainly never increase at the same rate as it does between the rich.  The bottom line is – the more money you have at your disposal, the easier it is to make money.

A person with a vast amount of money can open or buy new businesses; they can invest in stock markets and so on, whereas the average person who works a 9 to 5 job simply doesn’t have spare cash to work with. As the saying……you need money to make money.

In general, people’s wages are also not increasing in line with rising inflation, and this is a fact that can be verified by any large payroll companies. Even though the average person was earning less two or three decades ago, they were for the most part living a higher standard of life. The might be earning more now, but the increase in wages is not enough to compensate for the ever increasing cost of living.

One thing is for certain – unless the issue of wealth distribution inequality is addressed effectively and relatively soon, the current system is inevitably going to buckle under the strain.

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