1. Income inequality is defined as the uneven or unequal distribution of income over the economy among a population. Income inequality is measured by dividing up the population into various groups and then comparing the groups. After the second World War ended in 1945 the income inequality in US changed drastically. After the War inequality started to reduce in the United States. This was known as the Great Compression. Income rose for people who were in the bottom 90% of income distribution. If we investigate the past data, we will find that high marginal tax rates prevailed. This kept the wealth of the top 1% at a certain level and it was not allowed to rise. After this era, in the past 35 years the complete opposite happened. Marginal tax rates fell, and income rose for top 1%. Due to globalization, breaking of labor unions, competitive economies, incomes of bottom 90% did not rise much at all. The gains from economic growth did not get evenly distributed in the United States as this can be observed from previous data. The reasons for the changes in income inequality since 1945 is because postwar led to a high demand for laborers. With the combination for a high demand for laborers and high marginal tax rates for top earners the inequality fell. In addition, in the following years after postwar the marginal tax rates fell and the income of the top 1% rose, but the income of the laborers remained stagnant. This widened the gap in income distribution. 2. Income inequality is defined as the unequal distribution of wealth or income. Skilled workers may get paid more than unskilled workers due to their skills needed by the company. This can create an income inequality. It is measured by dividing the population into different groups and comparing which groups receive most of the distribution of income and which one receives the least. After World War II the income inequality was equal atleast for the first two decades. But it gradually picked up and became more unequal since 1968. Some reasons for this income inequality are family structure, technology and managerial structure. The family structure since 1968 has fallen to a single parent instead of a married couple. And the income of the single parent mainly women is less than a family with a couple. Similarly with technology improvements, companies look for people with skills hence they get more opportunities and their pay increases while the unskilled workers remain the same. New management system came into effect where they companies sought for people with effective reading, writing and communication skills to run the company. This brought more changes to income inequality.
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