Unequal Society: A Detailed Investigation of Wage and Income Inequality in the United States

Many articles and books have been published about income inequality in order to scrutinize its impact on the economy and social life. The most popular and well-known one of the first attempts was “Economic Growth and Income Inequality” by Simon Kuznets. Kuznets notes by going over the data set that there is an inverse U-shaped evolution between economic growth and income inequality. In this study, the validity of Kuznets theory and wage inequality in the United States is analyzed by using some different econometric techniques such as autoregressive distributed lag in the error correction model, Gini coefficient, and Lorenz curve. The result indicates that the evolution of inequality is U-shaped in the United States, and it has been climbing up. Furthermore, wage inequality among employees has grown serious over the years. The wage growth of some workers is much faster than the wage growth of other workers, and the wage growth of capital owners and working rich are much swifter than that of everyone in the American job market. That is one of the factors that induce an increase in income inequality in the United States. For the first time, in an inequality study, wage inequality among employees is computed using the Gini coefficient and Lorenz curve.