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The Income Gap is Getting Bigger in America

About Debt

The global recession is having an impact on nearly every segment of the world population, but in the United States the poor are feeling the crunch the most severely. While all income groups have taken an economic hit, those who were already struggling are suffering even more – and this means that the already vast income gap in America is growing at an even faster rate.

The income gap, which is an analysis of the amount earned by the wealthiest Americans when compared to the poorest Americans, shows that the rich continue to get richer and the poor are having greater difficulties moving out of poverty. Recent data released by the U.S. Census show that the concept of “upward mobility,” in which people could advance social and economic classes thanks to hard work, education and innovation, appears to be even more difficult to attain.

The gap is growing

Recent data issued by the U.S. Census indicate that the income gap has grown as a direct result of the recession. According to the information, middle-class and poorer Americans felt the sharpest decline in income during the recession. While all groups felt a loss of income, the rich felt the least impact.

The Census also reported that a shocking 13.2 percent of the U.S. population lives in poverty. Median income fell to $50,303, which was the lowest since 1997. Urban areas and metropolitan areas that were hit hard by foreclosures showed the sharpest increases in poverty rates.

Why it matters

Economists look to the middle class as a way of evaluating the nation’s economic health, prosperity and potential. With the income gap widening – at an alarming pace – this means that the middle class is shrinking. More often, someone is either rich or poor, with little ability to advance. Someone who is poor has fewer options to earn a better living and provide a better life for his/her family.

Economically, this hurts the nation because it means there are fewer people who are able to buy homes and cars, and participate in the economy. Instead, there are greater pressures on the government to help provide assistance (food stamps, and similar programs). Families who can’t get by often have children who drop out of school early. Having such a large portion of the public living at or below the poverty line has a domino effect on the rest of the economy.

Other data

Other statistics of note issued by the U.S. Census include:

  • The top 5 percent of American households earn $180,000 or more annually.
  • The highest concentration of citizens living at or below the poverty line is in the South.
  • Nearly 10 million Americans are on food stamps, and the number of families needing food stamps increased by 13 percent in 2008.
  • More than one-third of the residents in Flint, Mich., are on food stamps.
  • Cities with growing middle-class populations showed a marked decrease in the number of residents living in poverty.
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