Income inequality threatens economic growth
Tuesday, October 08, 2013 2:48 PM
The ascent to dazzling affluence achieved by fictional farm boy Jay Gatsby is becoming increasingly less plausible, posing risks for U.S. economic prospects, studies show, Bloomberg reported.
The widening gap between rich and poor - exacerbated by wage stagnation, rising tuition costs and $6 trillion in wealth wiped out by the housing market collapse - is making it more difficult for today's young people to have success climbing the income ladder than it was for previous generations. Former White House economist Alan Krueger dubbed the income inequality-immobility link "The Great Gatsby Curve," named after novelist F. Scott Fitzgerald's protagonist.
The mobility of workers versus their peers has also declined, threatening productivity, business profitability and economic growth, according to Wells Fargo Securities LLC's chief economist, John Silvia.
Although the ability to ascend income brackets still exists, the likelihood of a household jumping from poverty into wealth declined in the decade that ended in 2009.
"It really flies in the face of what we believe to be true as a nation, that we have equality of opportunity," said Diana Elliott, research officer for economic mobility at nonprofit Pew Charitable Trusts in Washington. "For this current generation of adults, if you're raised in the bottom, it's much harder to climb up the economic ladder."