Income Inequality Is Hurting The Economy, 3 Dozen Economists Say

By Christopher S. Rugaber

Wall Street Protests Fort LauderdaleThe growing gap between the richest Americans and everyone else isn’t bad just for individuals.

It’s hurting the U.S. economy.

So says a majority of more than three dozen economists surveyed last week by The Associated Press. Their concerns tap into a debate that’s intensified as middle-class pay has stagnated while wealthier households have thrived.

A key source of the economists’ concern: Higher pay and outsize stock market gains are flowing mainly to affluent Americans. Yet these households spend less of their money than do low- and middle-income consumers who make up most of the population but whose pay is barely rising.

“What you want is a broader spending base,” says Scott Brown, chief economist at Raymond James, a financial advisory firm. “You want more people spending money.”

Spending by wealthier Americans, given the weight of their dollars, does help drive the economy. But analysts say the economy would be better able to sustain its growth if the riches were more evenly dispersed. For one thing, a plunge in stock prices typically leads wealthier Americans to cut sharply back on their spending.

“The broader the improvement, the more likely it will be sustained,” said Michael Niemira, chief economist at the International Council of Shopping Centers.

A wide gap in pay limits the ability of poorer and middle-income Americans to improve their living standards, the economists say. About 80 percent of stock market wealth is held by the richest 10 percent of Americans. That means the stock market’s outsize gains this year have mostly benefited the already affluent.

Those trends have fueled an escalating political debate. In a speech this month, President Barack Obama called income inequality “the defining challenge of our time.”

Obama also called for an increase in the federal minimum wage, now $7.25. Republican leaders in the House oppose an increase, arguing that it would slow hiring.

Several states are acting on their own. California, Connecticut and Rhode Island raised their minimum wages this year. Last month, voters in New Jersey approved an increase in the minimum to $8.25 an hour from $7.25.

Read More  Income Inequality Is Hurting The Economy, 3 Dozen Economists Say.

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About The Soul Brother

An observer to the world. I have a unique view of the world and want to share it. It's all in love from the people of the "blues". Love, Knowledge, and Sharing amongst all is the first steps towards solving all the problems amongst humanity.
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One Response to Income Inequality Is Hurting The Economy, 3 Dozen Economists Say

  1. Pingback: Income Inequality Is Hurting The Economy, 3 Dozen Economists Say – Huffington Post « Dr Alf's Blog

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