In the year 2000, the average income of the top 1 percent in the United States was 88.5 times greater than the average income of the bottom 20%, signifying the largest rate of inequality since the Great Depression. This inequality rate continues to rise.Income inequality is a pressing issue that needs to addressed and solved. For many countries that are benefiting from economic growth, the profits go largely to the people at the top of the income hierarchy, whereas the income of the common workers hardly improves. Such is the case with China and the United States. Both countries have large economies that are among the top four in terms of GDP, and both countries expect to be an economic superpower of the 21st Century. However, all the stories of economic growth and prosperity form a gilded exterior that hides the unattractive truth inside. Both countries suffer from income inequality that severely deteriorates the lives of the middle and lower class workers. Both the United States and China suffer from income inequality for many reasons including immigration and migration, returns to skill, and a widening gap between the rural and urban dwellers.
The income distribution of a given society is the way in which income is dealt out by the economy. For example, if everyone earns the same exact amount of money, then there is perfect equality. Likewise, if one person earns all the money, then there is perfect inequality. Although income is ideally considered to be normally distributed, fitting the parameters of a normal curved distribution, certain countries, such as the United States and China, have a large skew towards the lower class. Researchers usually measure income distributions by dividing a population into segments, usually into quartiles or quintiles, and then measuring the amount of income each segment earns. A factor to consider when measuring an income distribution is income mobility: the ease at which workers can move up and down the income hierarchy. If the upper class always remains upper class and the lower class always remains lower class, then income inequality is a permanent and major problem. However, if mobility is present in which members of the different classes can move up and down the hierarchy, then income inequality isn't as grave of a problem.
The income distribution in both China and the United States continues to be very unequal with a large increasing gap between the amount of income the poor and the rich earn. For example, in 2002, the richest 30 percent of the Californian society made about 40 percent of the total income, a 15 to 25 percent increase since the last decade. The case for all of America is even worse, as Michael Lynch shows in his article “Info Gap”: “This gripe is grounded in data from the U.S. Census Bureau's annual report on income, the latest version of which was released in September. According to those data, the 20 percent of Americans with the lowest incomes earn a mere 3.6 percent of all wages paid, while the top twenty percent take home 49 percent of the loot”. Although it is expected that the richest 20 percent will earn the majority of the total income, the fact that they earn almost half of it is quite surprising. The Gini coefficient, a measure of income inequality in which the higher the number, the higher income inequality, of the United States remain at a poor 40.8, quite high compared to other developed countries of the world such as Japan and the nations of Europe, which have Gini coefficients from 24 to 30. This rate has been increasing ever since, with the gap between the wealthiest and poorest families growing 11 to 19 times since the past decade.
China is also a victim of income inequality. In 2000, the richest 20 percent earned about 42 percent of the total income, whereas the poorest 20 percent earn about 6.5 percent of the total income. The rate at which the inequality increases in China is far greater than in the United States and currently, the income inequality in China is much more tremendous. With a Gini coefficient of 44.7, it just surpasses the United States. As shown, both nations clearly suffer from poor income distribution and this disparity is on the rise.
Two of the major factors that greatly contribute to the income inequality in both China and the United States are immigration and migration. This is particularly true in the United States and the currently growing immigration to the nation. With data, many institutes around the United States confirm that there is a strong correlation between the high rise of immigration and the increase of income inequality. Viewed as the land of opportunity and fortune, mass immigration to the United States started since the 19th Century. Similar to 19th Century, the bulk of today's immigrants are lower class workers who work for substandard wages. These hundreds of thousands of immigrants are usually poorly educated and tend to cluster at low paying jobs. Researchers at the Public Policy Institute in California have found: “Between 1969 and 1997, the share of immigrants in the male workforce grows to 36 percent, but this growth has concentrated in the lower half of the wage scale”. As shown, the number of poor undereducated immigrants seems to rise each year. According to Maria Enchautegui at the University of Puerto Rico, the number of immigrants without a high school diploma from 1980 to 1994 jumped from 2.8 million to 5.1 million. As expected, this also correlates with the poverty rate among the immigrants and their wages: For example, in California, over 80% of the male immigrants earn less than 10 percent of the total income of the male workforce. The addition of so many lower class immigrants decreases the mean wages of lower class workers in the United States. With adjusted inflation rates, the mean hourly wage of the lower class worker fell by 26 percent from 1979 to 1997. This decrease of wages and increase of the number of poor workers as a result of immigration greatly diminishes the middle class proportionally, which is key in maintaining an equal income distribution. Another problem regarding immigration and income inequality is illegal immigration. Although there is a minimum wage law, this does not prevent illegal immigrants from Latin America and Asia from working below minimum wage, further heightening the income inequality if the illegal immigrants are counted in the American population. The increase of illegal immigrants throughout the years further increases the gap between the rich and poor and results in a more uneven income distribution.
