Final answer:
Economic inequality has been increasing due to changes in American household structures and greater income inequality in 'winner take all' labor markets. This has led to a decline in the middle class's size, income, and wealth, while corporate profits and CEO pay have significantly increased.
Step-by-step explanation:
In our post-industrial society, the degree of economic inequality has been increasing. This trend is not exclusive to the United States but has been more pronounced within the U.S. economy. The main factors contributing to this rise in inequality are the changing demographics of American households and the significantly greater inequality of wages epitomized by the 'winner take all' labor markets. Additionally, there has been a consistent decline of the middle class since the 1970s, reflected in size, income, and wealth, while corporate profits and CEO compensation have surged.
Measuring Economic Inequality
To measure economic inequality, economists may use various indicators, such as the Gini coefficient or the disparity in income distribution between different population percentiles. These measures help in understanding the extent and evolution of inequality over time.
Factors Contributing to Increased Inequality
Two primary factors have been identified for the rising inequality in household income:
- Shift in household composition, often resulting in households with fewer or no earners and an increase in single-earner households.
- A labor market increasingly rewarding high-skilled workers disproportionately, leading to what's known as 'winner take all' labor markets, where the highest earners gain a larger share of the income.
These factors, coupled with corporate and executive earnings growth, have created a widening gap between the wealth of the very rich and the rest of the population.