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An Examination of the Origins and Continuance
of Income Inequality in the United States
Nadine Janzen
PSCI 401
University of Regina
Professor Farney
Winter 2016

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Table of Contents
Introduction .......................................................................................................................3
The Sociology of Inequality ............................................................................................10
Historical Context…………………………………………...…………………...10
Family Structures……………………………………………...…………………18
Teen Pregnancy & Single Parenthood.…....………………..……………19
Education & Extra Curricular Participation………………………...……………21
Class……...……………………………………………………..……………......23
Race…………………………………………………………………………....…25
Crime and Incarceration………………………………………………………….29
Historical Context of Criminal Activity, Crime Rates & Sentencing Policy………29
Incarceration………………………………….………………………..……30
Political and Economic Inequality……………………………………………………..32
Conclusion…………………………………………………………………………...….43
Sociological Reforms ……..……………………………………...……….……..43
Financial and Political Reforms.........................................………..……..……....48
References and Bibliography ……………………………………………………….....52

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1. Introduction
A certain degree of inevitable and arguably healthy inequality exists in every
society and generation. Current levels however are widely agreed to be problematic in
various complex and interconnected ways. It is a problem worthy of dissection if for no
other reason than the fact the divide between the poor and the rich, even the poor and the
middle class is at an all time high. The Pew Research center verifies this in a December
2014 analysis of wealth-which they define as,
“the difference between the value of a family’s assets and debts. It is an important
dimension of household well-being because it’s a measure of a family’s “nest
egg” and can be used to sustain consumption during emergencies as well as
provide income during retirement. Wealth is different from household income,
which measures the annual inflow of wages, interests, profits and other sources of
earnings. The data have also shown a growing gap in wealth along racial and
ethnic lines since the recession ended.” (Fry and Kochhar, 2014)
Pew also discovered that “the gap between America’s upper-income and middle-income
families has reached its highest level on record” (Fry and Kochhar, 2014) and that
“America’s upper-income families have a median net worth that is nearly 70 times that of
the country’s lower-income families, also the widest wealth gap between these families in
30 years.” (Fry and Kochhar, 2014) This derives from many factors including: various
economic and political shifts, changes in family structures, race, and the ‘war on crime’.
Its consequences include: increased crime, a reduction in both health and education
services and resources, stifled economic growth and political inequality. (Seven Pillars,
2015) It has far-reaching and critical implications for society as a whole, especially for
the most vulnerable demographic groups. It is also spreading on a national and global
scale, (Vieira 2012; Sommeiller and Price, 2015) and if effective solutions are not found,

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further issues will arise as the economy and population demographics continue to shift.
(Harkin, 2010; Cingano, 2014)
Undeniably income inequality has had a ripple effect that has stretched out into
many of the escalating social problems in today’s America. While this paper looks
specifically at the widening financial gap in the United States it is important to
understand this trend is not unique to that particular nation but rather is observed
throughout the world. Oxfam published a paper in January 2015 demonstrating, “1 in 9
people do not have enough to eat and more than a billion people still live on less than
$1.25-a-day” (Byanyima, 2015) and that,
“the richest 1 percent have seen their share of global wealth increase from 44
percent in 2009 to 48 percent in 2014 and at this rate will be more than 50 percent
in 2016. Members of this global elite had an average wealth of $2.7 million per
adult in 2014. Of the remaining 52 percent of global wealth, almost all (46
percent), is owned by the rest of the richest fifth of the world’s population. The
other 80 percent share just 5.5 percent and had an average wealth of $3,851 per
adult – that’s 1/700th of the average wealth of the 1 percent.” (Byanyima, 2015)
Along those lines, the United Nations Research Institute for Social Development
(UNRISD) in connection with the 31st
Human Rights Council recently held a panel
discussion on Economic Inequality, Financial Crises and Human Rights at the UN offices
in Geneva addressing the ramifications of reduced foreign aid by developed nations and
the consequences of international tax havens, particularly in the aftermath of global
financial crisis’ as they contribute to income inequality and relate to human rights.
(Unrisd.org, 2016) Understanding the global context is important in order to understand
that income inequality is not a uniquely American phenomenon nor a single story but
rather a multi-national problem with complex and vast consequences. For the purposes of
time and space this paper however focuses on the American story.

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In the interest of shedding some light on the other side of the equality debate,
some, including Scott Winship of The Federalist, have argued income inequality can be
beneficial,
“Data from sociologist Lane Kenworthy indicate that the tendency is for
countries with larger increases in income concentration within the top 1 percent to
have stronger income gains not only within the middle class but among the poor.
These findings make sense if you are open to the idea that greater inequality
might actually increase the size of the economic pie rather than shrinking it. That
is, if economic growth is strong enough—enlarging the pie by a sufficient
amount—then even though the slices going to the poor and the middle class are
comparatively skinnier, they still end up with more pie. The mistake that decriers
of inequality make is to assume that the economic pie is fixed, so that a bigger
slice for the top must necessarily result in less pie for everyone else. In fact, the
evidence from economic research over the past 15 years is that in developed
countries, more inequality tends to go hand in hand with stronger economic
growth.”(Winship, 2014)
This argument is based on a capitalist ideology which views sustained economic growth
as the ultimate goal of a fully developed society. However, as the Spirit Level by Richard
Wilkinson and Kate Pickett illustrates, health and social problems are worse in
economically unequal societies. Additionally reported were lower levels of trust and
higher rates of mental illness, infant mortality, drug use, teenage birth rates, and rates of
imprisonment. (Wilkinson and Pickett, 2009) Finally, social mobility was highest in the
most equal countries. This is key because social mobility is an important component to
the growth, progress and overall health of an inclusively strong society, aside from the
economic story.
In a nutshell this paper will demonstrate why American inequality is a problem,
and how it became one. Ultimately it will offer a few possible solutions to fixing the
problem. It will divide the sources and outcomes of inequality into sociological,
economic and political components. They will each be examined through a historical lens

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tracing the steps from the 1920’s to the present. The conclusion will then touch briefly on
a number of policy proposals and reforms under consideration in order to illustrate future
courses of action and possible directions in which the United States could head, given the
increasingly polarized social, political and economic environment it currently finds itself
in.
The sociological chapter will examine many relevant changes and trends that have
evolved over the past century in the American sociological narrative as it pertains to
income inequality. It focuses on the evolution of mainstream values and attitudes,
particularly those surrounding family structures, crime, poverty, education quality,
segregation and the opportunity gap. It is necessary to break down these shifts in order to
understand how their combination contributed to the current situation. This chapter will
first look at the decades long shift from the early 21st
century’s more traditional views on
gender roles, sexual activity and marriage and family structure. It will then examine the
transition toward the current environment with its more liberal views of equal rights,
recreational sex and divorce as well as the ramifications of each. It will study the long-
term effects of teen pregnancy on both parents and children, as well as the often-
following single parenthood, the importance of education and subsequent increase in
social capital and influence on mate selection and attitudes toward marriage. Additionally
this section will examine the evolution of racial discrimination from the pre-civil rights
period to current, more subtle, forms of discrimination including most significantly mass
incarceration. It will then compare crime and incarceration rates and the demographics of
offenders from the beginning and mid century points to the present. Further, it will look
at the effects of mass incarceration on the families and communities from which

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prisoners originate. Finally it will study the transition from racial segregation toward the
more class-based system found today. It will also glance at the distribution of resources
within the now tier based education system before tying it all together seeking to
demonstrate the seemingly impossible odds poor kids face when it comes to navigating
the opportunity gap and climbing the ladder.
We will then turn to the financial and political components, creating a timeline
from the decade preceding the crash of 1929 through the depression years, the war and
post war economic boom, highlighting the significance of an economy heavily reliant on
manufacturing. From there we examine the origins and effects of mass deregulation from
the early 1970’s, using interest rates as a specific example. We will also look at the
economic and political ramifications that followed, particularly how the sub-prime
mortgage crisis contributed to the last recession. This section will also examine the more
recent repeal of legislation restricting the power of the financial industry -specifically
Glass-Steagall. It will also study the Citizens United Supreme Court decision that served
to encourage a heavily capitalistic approach to the electoral process. This ruling
essentially forced candidates to compete for ‘corporate sponsorship’ in order to compete
with fellow candidates. That then limited the playing field and voices heard in the
political realm. Finally it will demonstrate how all of these factors have led to an
increasingly polarized and partisan political process in recent years and specifically in the
latest election cycle.
Discovering the past is essential to understanding the present as the combination
and complexity of all these factors joining together is responsible for the creation of the
historical level of inequality currently represented. Were just a few of the sub-

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components absent or had a few been resolved in decades past before the rise in
population growth and increase in the divergence of political and social attitudes led us to
now, income inequality may have taken a different turn and not reached the alarming and
intimidating levels seen today. For example, had the United States incorporated some
type of universal social benefits system following the Second World War as many
developed nations did, (Popkin, 2002, Open Learn) there would have been a ‘safety net’
that may have prevented, or at least caught countless –and arguably needless- cases of
generational poverty entrapment.
Inequality has ramifications that go beyond a simple binary classification of
‘haves’ and ‘have nots’. It has created a multi-tiered system where the ‘haves’ rarely if
ever have to interact with the ‘have-nots’. From special entrances and exits from popular
events to private jets or at the very least special, faster lines through airport security to
gated communities and personal shoppers, the elite live in an insulated seclusion from the
un-comfortableness of poverty. Those daily subject to its un-comfortableness meanwhile
struggle for years in survival mode to pay long outstanding and often life crippling bills
or other loans occurred in unexpected or emergency situations which can serve to
negatively and permanently alter their credit rating. There is one way that the poor –at
least those who haven’t broken ties with their family and community –benefit. It is one
that has proven itself repeatedly in studies conducted of poverty stricken communities
and families. (Fellerman and Debevec, 1993; Angelucci et al, 2009) Namely that of
close-knit community and family supports that provide a safety net-albeit one much too
thin- that serves to protect them from slipping further down the slippery ladder in the face
of immediate, short term need such as a tank of gas, or babysitting, caring for a sick

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relative in the hospital, taking in a struggling friend or relative, or buying groceries or
other necessities as one can afford for those who can’t in order to help them until the next
paycheck comes. However because of today’s levels of socio-economic segregation, the
resources the poor are able to access fail to adequately provide for even basic needs
which all but ensures members of the upper middle class –the majority of which self-
identify as ‘good people’ –are increasingly less likely to interact with those growing up
on the ‘wrong side of the tracks’. Without such regular interaction one fails to develop
empathy toward or an understanding of those whose qualification of a ‘bad day’ is vastly
different from one’s own.
Lastly this paper will look at and present financial, political and sociological
solutions that have been proposed in response to the numerous dilemmas addressed
throughout the previous sections. It will put forth the reality of life for those on either end
of present-day ‘two tiered’ America. Most importantly it will assert that inequality is an
issue that is not only a popular buzzword or controversial discussion topic but also an
oppressive system that weaves its way into the fabric of the day-to-day life and devalues
the societal and self worth of individuals and communities.

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2. The Sociology of Inequality
Historical Context
The sociological part of this puzzle is an important aspect of the story because it
is hard to fully separate societal influences from economic and political structures in
many areas of academic research not solely income inequality. Studying the ways in
which individuals and communities self-identify is a good place to begin when examining
why individuals, groups and systems act in the ways they do and connecting practice to
theory and abstract to reality. In this section we will look at the ways family structure,
education, class, race, and crime and incarceration have evolved over the past century and
brought us to the situation we find ourselves in today.
Understanding how the United States was formed and its resulting core values is
important to appreciating why the social welfare state, that provides an important safety
net for its citizens in most other WEIRD-Western, Educated, Industrialized, Rich and
Democratic- countries (Henrich, Heine and Norenzayan, 2010), is glaringly absent in the
United States. The 1920s –where we begin our investigation- was perhaps the decade of
the past century mostly closely resembling the current when it comes to the wide income
gap. As Brian Payne argues, “today, in terms of the working poor and wealth inequality,
the United States is basically back to where it stood in the 1920s” (Payne, 2013). When
the First World War had ended North America, along with much of the world, took an
isolationist approach to international relations. The wealthy lived in largesse throwing
Gatsby-esque soirees and indulging in extravagance while as Payne elaborates,
“Good years were often as difficult as bad years for the working poor…the
working poor did not experience booms and busts in the way that much of the
history of capitalism suggests. When a family lives and works at or below
subsistence levels, they are unable to hedge against looming disaster. The result is

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chronic, generational poverty, a sad measure of continuity in an age of dynamic
progress.” (Payne, 2013)
The Wall Street Crash of 1929 changed these dynamics drastically and set in motion a
decade of widespread poverty and economic depression. This already tumultuous decade
ended with another war starting in Europe, one that would continue for the first half of
the 40’s. World War Two changed the world in countless ways but particularly in how
the majority of participating developed countries began to view the concept of the
‘welfare state’ after being exposed to what the worst of humanity is capable of. Many
Western nations, particularly many in Europe, adopted comprehensive policies from the
idea of the ‘welfare state’ –defined by Merriam-Webster as, “a social system in which a
government is responsible for the economic and social welfare of its citizens and has
policies to provide free health care, money for people without jobs, etc.” (Merriam-
webster.com, n.d.) This ‘welfare state’ has served to insulate these countries and their
citizens from the very harshest consequences of the income divide. America however did
not adopt the ‘welfare state’ mentality and one could argue their failure to implement
such programs has in part led to the current state of affairs.
With the homecoming of the male population from Europe in the late 1940’s
following the war, family dynamics again shifted. Women who, out of necessity, had
been employed in the manufacturing industry returned to the private sphere to engage in
unpaid household labor and childcare while the men resumed employment in the factories
and corporations of the public sphere. Post-war economic growth and a booming
manufacturing sector enabled government investment in veterans assistance and social
programs and helped encourage and support the individual nuclear family model within

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the larger involved suburban neighborhood-a widespread phenomenon which achieved
varying degrees of success over the next generation.
The baby boomers were born during this time to parents who themselves had been
born in the 1920’s and 1930’s. The latter of which Malcolm Gladwell points to as being
the best decade of the century to be born. He clarifies this theory in in his work Outliers,
“In 1915, there are almost three million babies. In 1935, that number drops
by almost six hundred thousand and then, within a decade and a half, the
number is back over three million again… The decade of the 1930s is what
is called a “demographic trough.” In response to the economic hardship of the
Depression, families simply stopped having children, and as a result, the
generation born during that decade was markedly smaller than both the generation
that preceded it and the generation that immediately followed it.” (Gladwell,
2008)
Richard Easterlin in his work Birth and Fortune cites the economist, H. Scott Gordon
who describes the far-reaching benefits of entering the world during this period,
explaining,
“When he opens his eyes for the first time, it is in a spacious hospital, well-
appointed to serve the wave that preceded him. The staff is generous with their
time, since they have little to do while they ride out the brief period of calm until
the next wave hits. When he comes to school age, the magnificent buildings are
already there to receive him; the ample staff of teachers welcomes him with open
arms. In high school, the basketball team is not as good as it was but there is no
problem getting time on the gymnasium floor. The university is a delightful place;
lots of room in the classes and residences, no crowding in the cafeteria, and the
professors are solicitous. Then he hits the job market. The supply of new entrants
is low, and the demand is high, because there is a large wave coming behind him
providing a strong demand for the goods and services of his potential
employers.” (Easterlin, 1987)
The children of the Depression were not the only ones to profit from the advantages of
being born in a prime birth year, their children, the baby boomer generation –defined as
those born between 1946 and 1964 (Fry, 2015)- also benefited from their parents’
generational ‘luck’. Their fathers, due to the strong job market and economy, were able to

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fully support the family financially, which allowed their mothers to stay home and care
for the household. Divorce was extremely rare and children of both the wealthy and poor
interacted in a variety of public settings, from church to school to social activities and
community events. Regular social interaction across class lines and a reliable single-
family income, combined with their parents’ long-term financial saving and frugality
allowed the majority of boomers the opportunity to choose their future careers based on
preference rather than necessity.
The feminist movement and coinciding sexual revolution of the 1960’s-80’s also
successfully challenged and changed widely accepted social norms, specifically those
regarding gender roles and sexual identity and activity, particularly those of heterosexual
normativity, abstinence, and the definition of women’s roles in the private and public
sphere. This allowed for increased autonomy for women and a shift in family dynamics
as women became more likely to enroll in and complete post secondary education and
enter the workforce before marriage and to continue in it after. As both the men and
women of the baby boomers joined the ranks of the employed, the economy began slowly
shifting from one primarily manufacturing based which allowed blue-collar factory
workers to maintain employment in the same position at the same company for decades
and still adequately provide for their families to one technologically focused, demanding
specialized, specific knowledge, many years of education and increasingly competitive
work environments. This then contributed to a divide in the opportunities available to the
offspring of the working class in comparison to their white-collar counterparts. As such,
the graduates of Putnam’s class and their fellow members of the Baby boomer generation
were the last to have relatively equal access to the necessary levels of education, and

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resulting careers that lead to a parallel or higher standard of living when compared to
their parents’. Putnam explains,
“Comparing Port Clinton kids in the 1950’s with Port Clinton kids today, the
opportunity gap has widened dramatically, partly because affluent kids now enjoy
more advantage than affluent kids then, but mostly because poor kids are now in
much worse shape than their counterparts then.” (Putnam, 2015)
The shift in economic structure along with family structures, as we will soon discover,
assisted in creating the socio-economic segregation we see today. Gregory Jordan shares
that racism toward African-Americans created obstacles to their “economic success” and
that this problem is multiplied by issues exclusive to the American narrative –
particularly capitalism and demography. He explains,
“For example, as most White and a few middle class Blacks followed jobs from
the cities to the suburbs, the people left behind were relatively uneducated,
unskilled and lacked the kind of mainstream role models that would have helped
them to transition to the middle class. As a result, they suffered disproportionately
from urban unemployment, low wages, unequal distribution of wealth and
resources, and relatively poor social and educational services.” (Jordan, 2004)
He further clarifies the importance of education when it comes to, “[allowing] people to
adapt to changes in the economy, and by extension changes in the demand for labor.”
Jordan explains this in terms of the economic shift from manufacturing to the current
service based on. He shares, “The gains in wages and working conditions that were
made in the manufacturing sector have been weakened by the service economy.” He
also offers an explanation of how, “The gains in US GDP are in part due to the success
of a consumer economy that rewards Wal-Mart and its cousin conglomerates” before
questioning the price when it comes to “Americans who work low wage/benefit jobs.”
He uses Wal-Mart as an example stipulating that they,

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“[offer their] employees one of the weakest wage/benefits packages of any
corporation of its kind and continues to fend off unionization; it is now one of the
most powerful corporations with a huge market share and monopsony power over
its suppliers (Jones, 2003)”
Jordan also expands on how another economic shift, namely, “the growing demand for
personnel trained in various high-end and relatively well paid disciplines such as
information technology and finance (Holzer 1990, Wilson 1987) has contributed to socio-
economic segregation. He concludes his analysis connecting the way in which the
transition from the somewhat more middling or equal economy of manufacturing to the
current more divided one comprised of highly specialized technological workers and
service positions requiring little to no education or special skillset also added to the
spread of class separation. He summarizes,
“In short the service sector has split into two halves, low-income service
workers and high-income service workers, with little opportunity in between.
Indeed, income inequality is an important indicator in its own right, but is better
understood with reference to its own causes, which Gottschalk & Smeeding
(1997) argue include the erosion of the "real" minimum wage, the declining
influence of unions, and changes in the market demand for skilled labor versus
unskilled labor. (Jordan, 2004)
These economic shifts accompanied by social changes in family structures, where -as
Isabel Sawhill describes in her article The New White Negro- it is now more often class
rather than race which plays a role in determining family structure- when combined with
public perception and attitudes, helped create an environment of increased individualism
and class-based segregation. Sawhill shares that while collectively blacks continue to
marry less frequently than whites, it is now the unskilled and least educated, regardless of
race, who are the least likely to marry. She emphasizes that, “Marriage is an emerging
dividing line between America’s moderately educated middle class and those with
college degrees.” and that, “for younger women without a college degree, unwed

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childbearing is the new normal.” She also provides statistics from her research to back up
her assertions, stating,
“in 1960, 76 percent of adults with a college degree were married, compared to 72
percent of those with a high school diploma- a gap of only 4 percentage points.
By 2008, not only was marriage less likely, but that gap had quadrupled to 16
percentage points, with 64 percent of adults with college degrees getting married
compared to only 48 percent of adults with a high school diploma.” (Sawhill,
2013)
Sawhill goes on to assert that changes in the way families are formed prove problematic
not only for people worried about keeping with ‘family values’ but also for the
possibilities of upward mobility in a culture that was birthed from the concept of
everyone having equal opportunity. She concludes that,
“Because the breakdown of the traditional family is overwhelmingly occurring
among working-class Americans of all races, these trends threaten to make the
U.S. a much more class-based society over time. The well-educated and upper-
middle-class parents who are still forming two-parent families are able to invest
time and resources into their children –time and resources that lower-and
working-class single mothers, however impressive their efforts to be both good
parents and good breadwinners, simply do not have.” (Sawhill, 2013)
This then contributes to a detachment from the previous community philosophy that
viewed children as a communal investment in the future with the responsibility of raising
them falling to all as part of an informal and intuitive strategy akin to ‘it takes a village’.
According to the Brookings Institution,
“children of well-off families are disproportionately likely to stay well off and
children of poor families are very likely to remain poor. For example, a child born
to parents with income in the lowest quintile is more than ten times more likely to
end up in the lowest quintile than the highest as an adult (43 percent versus 4
percent). And, a child born to parents in the highest quintile is five times more
likely to end up in the highest quintile than the lowest (40 percent versus 8
percent). These results run counter to the historic vision of the United States as a
land of equal opportunity.” (Hamilton Project, 2013)

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Reverting back to the genesis of the economic shift, college-educated boomers were able
to provide resources for their children that their parents had not been fully able to. This
was due to the political, economic and social circumstances the ‘boomers’ parents’ faced
in their formative years through the aforementioned Depression and World War. The
‘boomers’ children –Millenials- naturally expected similar success to come their way, as
it had for their parents. Due to a relatively long period of stable economic growth the
majority were also able to find a place for themselves in the workforce. Their parenting
techniques were much more hands-on and resulted in the now common ‘helicopter
parenting’ approach (Acocella, 2008) that left their children, Millenials, who came of age
during the last recession, unprepared and ill-equipped for an ultra-competitive job market
and stagnant wages. (Reuters.com, 2015; Economist.com, 2015)
The boomers who choose not to or were unable to attend post-secondary
education continued in the trajectory of their parents. However, they soon found
themselves heading for the increasing unemployment lines as the American
manufacturing sector gradually went bust and the economy shifted, becoming primarily
service and technology based. This transition served to -within a generation- create a
skills and resulting wage gap between the by-now increasingly educated and specialized
upper class and those who now found themselves permanently regulated to the oft-
inflexible and physically strenuous custodial, maintenance and service positions making
up the working class. It not only created a wage gap but also contributed to the shift in
housing segregation from one that had been racially based to the current primarily class-
based system. This left the working class, the majority of whom were people of color,

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defeated with little realistic hope of their children surpassing their career prospects and
attaining the ‘American dream’.
The now seemingly insurmountable opportunity gap and accompanying attitude
of hope-and-helplessness began to give way to many of today’s most predominant
concerns surrounding inequality, namely: an increase in and generational cycle of
children born to unwed teenage mothers, increasing reliance on social programs, public
housing and other forms of governmental assistance, substandard public education in
low-income school districts, political and social apathy, the degradation and depreciation
of public spaces and a decline in communal pride. We now turn our attention to the way
in which family structures have contributed to present day inequality.
Family Structures
The vast majority of children born in the post World War Two period, as Putnam
discusses in his work ‘Our Kids’, were raised in homes with stay at home mothers still
married to their fathers. They attended public school -socializing there with neighbors
and friends from all walks of life. They were taught to value hard work, frugality and
living within their means. These lessons were learned from their parents who had lived
through the lean years of the thirties. The 1950’s - a time where traditional gender roles
were the accepted norm and premarital sex was discouraged and widely accepted as
immoral- saw the majority of people marry in their late teens to early twenties with many
of these relationships consisting of college-educated men paired with high school
educated women who would then take on the role of homemaker while the former served
as the household’s financial breadwinner. Today a more socially liberated view of
premarital sex has allowed for the formation of a more binary system with dual income

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earning nuclear families becoming the standard idealized family model. Long-term
romantic couplings between the mutually college educated are often as much carefully
calculated and evaluated strategic partnerships, as they are an emotional affair of the
heart. Meanwhile those with a high school education or less face limited prospects and
opportunities. This leads us to discuss how pregnancy, particularly among young women
who have not completed high school, can affect one’s chances at escaping poverty and
contributes to generational inequality.
Teenage Pregnancy
There is a self-perpetuating generational cycle, which often occurs in the context
of those living below the poverty line: namely that when teenagers have children, their
children become significantly more likely to also have children at a young age. (Baldwin
and Cain, 1980) Paired with the fact that working class women and those without a
college education are also at a significantly higher risk of pregnancy outside of wedlock,
often resulting in single parenthood, (Cherlin, Talbert and Yasutake, n.d.), this enforces a
cycle of not just teen pregnancy but also poverty. This is because, as previously
mentioned, teenage mothers are at a much larger risk of both being single parents
(Baldwin and Caine, 1980) and ending up below the poverty line. As The National
Campaign to Prevent Teen and Unplanned Pregnancy demonstrates in their ‘Why It
Matters’ report,
“Between 2009 and 2010, roughly 48 percent of all mothers age 15-19 lived
below the poverty line. Teen mothers still living with their own family were
somewhat better off, as only 34 percent of them lived below the poverty line,
while teen mothers who did not were particularly at risk – 63% of them were
living in poverty. As their children grow older, their likelihood of living in
poverty increases. Forty-one percent of mothers who gave birth before age 20
were living in poverty within the first year of their child’s birth, while the chances
of living in poverty rose to 50 percent when their child reached age three, in part

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because more of them have left their own parent’s home. Non-Hispanic black and
especially Hispanic teen mothers became even more likely to drop below the
poverty line once their children reached age three.” (Why It Matters, 2012)
Children of teenage mothers are also at a significant risk not only of becoming teen
parents themselves but also, as the Schuyler Center for Analysis and Advocacy points
out,
“[are] more likely to be born prematurely and at low birth-weight, … blindness,
deafness, chronic respiratory problems, mental retard-ness mental illness, cerebral
palsy, dyslexia and hyperactivity. Children of teen mothers are 50% more likely
to repeat a grade, less likely to complete high school and have lower performance
on standardized tests than those born to older parents. [These children] are more
likely to live in poverty and suffer higher rates of abuse and neglect than would
occur if their mothers delayed childbearing” (Schuyler Center, 2008)
Teenage girls who become pregnant also increase their likelihood of experiencing other
difficult life altering, outcomes, particularly when it comes to completing even secondary
education that helps to compete in the current workforce. The Schuyler Center Report
illustrates teenage mothers are,
“…less likely to complete the education necessary to qualify for a well-paying job
– only 41% of mothers who have a child before age 18 ever complete high school.
In the past 25 years, the median income for college graduates increased 13%,
while the median income for high school dropouts decreased 30%.” (Schuyler
Center, 2008)
This is particularly relevant because those at the bottom of the wealth gap are much more
likely to be less educated, unemployed, stressed, experience health issues,
demographically identify as female, young-under age 30 (Parker, 2012), and be of a
racial minority and single (Institute for Research on Poverty, n.d.; APA, n.d.) while those
at the top are more likely to be happier, healthier, college-educated, married, have a job,
own their own home and be college educated. (Parker, 2012)

21. 21
Education and Extra Curricular Participation
A lack of equitable participation in outside social activities which poor kids are
less likely to participate in, severely limits opportunities for low-income children to meet,
develop a friendship with, or garnish empathy towards people from diverse backgrounds
and circumstances. This is confirmed by a report on Extracurricular Participation and
Student Engagement from the National Center for Education Statistics that shares,
“Although differences in availability of extracurricular opportunities
between less affluent and more affluent schools were small or nonexistent,
students of low socioeconomic status (SES) were less likely to participate in
activities than were high SES students(3). Almost three-quarters of low SES
students participated in at least one activity, compared with 87 percent of high
SES students. The participation of low SES students was consistently lower than
that of high SES students in each type of activity, with the exception of vocational
or professional clubs, such as Future Farmers…of America, in which low SES
students were almost twice as likely to participate.”(Institute of Education
Sciences, 1995)
Historically inclusive communal resources, particularly quality education and social
networks, that were once shared and distributed amongst a town or city’s population with
little regard to one’s social class at birth have now become concentrated in the upper
echelons of the socio-economic elite. This has occurred for multiple reasons including
family resources and connections to social capital, as Putnam illustrates,
“Upper-class parents enable their kids to form weak ties by exposing them
more often to organized activities, professionals, and other adults. Working-class
children, on the other hand, are more likely to interact regularly only with kin and
neighborhood children, which limits their formation of valuable weak ties.”
(Putnam, 2015, pg 210)
He also suggests,
“Poor kids, through no fault of their own, are less prepared by their families,
their schools, and their communities to develop their God-given talents as fully as
rich kids. For economic productivity and growth, our country needs as much
talent as we can find, and we certainly can’t afford to waste it. The opportunity

22. 22
gap imposes on all of us both real costs and what economists term “opportunity
costs.”(Putnam, 2015, 230)
The privatization of public institutions has arguably also added to the growing
opportunity gap that contributes to the far reaching effects of an arbitrary ‘birth lottery’.
That event of random chance now provides endless opportunities for those with the good
fortune of winning, while the limitations to upward mobility for those born into poverty
are higher than ever. While extra curricular activities play a role, education itself is a
particularly important institution to examine.
The majority of students today attend public schools. The quality of public
education varies significantly across school districts. Most inner city public schools are
overcrowded, under funded and understaffed. (Renchler, 1992; Kozol, 1991) Meanwhile
schools in neighborhoods with a higher socio economic status overall benefit from the
rippling effects that often brings namely more involved parents, financial, and social
resources. (Renchler, 1992; Putnam, 2015) These advantages have a huge impact when it
comes to comparing average high school graduation rates. According to the APA,
students from privileged families -and thus districts- were five times more likely to
graduate than those from disadvantaged ones. (Rumberger, 2013) This presents serious
ramifications in terms of future opportunities as youth who do not graduate from high
school are much more likely to be involved in criminal activity (Tyler and Lofstrom,
2009) while, among other negative outcomes, children whose parents have been
incarcerated are much more likely to drop out of high school and to be incarcerated
themselves one day. (Dallaire, 2007) The connection between the socio-economic status
of school districts, quality of schools and graduation rates begs a closer look at the socio-
economic segregation prevalent in today’s America.

23. 23
Class
Class segregation allows low-income neighborhoods to feel the loss of public
resources in tangible and significant ways. It differs in certain ways from the racial
segregation experienced from 1870 to the mid 1950’s in the Jim Crow South. (Ferris.edu)
Class segregation presents a similar but different set of problems than its predecessor.
African-American communities during Jim Crow, while still separated by class, had more
of a mixed-income structure due to the prevalence of racial segregation which kept those
with high social capital and skills such as doctors, lawyers, teachers and social workers
living in relatively close proximity to their working class counterparts. This helped to
create a sense of inclusivity, connectedness and community under the larger
discriminatory system. (Seitles, 1996; Lawson, n.d.) When class separates neighborhoods
it changes the resources residents have access to in many ways including a necessary
range of social capital that contributes to creating a vibrant, healthy and well-rounded
community. In poor neighborhoods today, illegal dumping and abandoned lots become
symbols of the isolation and disregard that have wove their way into the soul of these
marginalized communities and their citizens. This creates a different social contract
among inhabitants’-one of fear of each other and anger at the outside world. These
attitudes contribute to higher rates of crime and drug use and, as a result, contribute to
increased incarceration and arrest. Additionally it can lead to instability in the
neighborhood as its citizens rotate in and out of prison and its children in and out of
school. Concentrated poverty also contributes to a high turnover of residents as folks who
struggle financially are evicted and forced to move from place to place while those with
access to resources and social capital move away at their first opportunity. These are also

24. 24
the places the term ‘food desert’ refers to -that is a community or concentrated
geographic area without access to a grocery store and/or fresh produce. The Atlantic
published an article aptly titled, “It’s expensive to be poor” illustrating some of the
reasons why rising above the poverty line is not only geographically dependent and much
less likely than sixty years ago but also virtually impossible because of the hidden costs
involved, including that,
“If you can’t afford the first month’s rent and security deposit you need in order
to rent an apartment, you may get stuck in an overpriced residential motel. If you
don’t have a kitchen or even a refrigerator and microwave, you will find yourself
falling back on convenience store food, which in addition to its nutritional
deficits- is also alarmingly overpriced. If you need a loan, as most poor people
eventually do, you will end up paying an interest rate many times more than what
a more affluent borrower would be charged.” (Ehrenreich, 2014)
Because it is expensive to be poor (Ehrenreich, 2014) residents of these neighborhoods
are also more likely to be overweight or obese and suffer the health issues that
accompany that. Not only do they not have access to groceries and produce but many also
do not have access to a car and rely on often-inefficient public transit. According to Adie
Tomer from the Metropolitan Policy Program at Brookings,
“59.8 percent of zero-vehicle households have incomes below 80 percent of the
median income for their metro area. The share is essentially the same across cities
(59.8 percent) and suburbs (59.7 percent). By comparison, only 23.9 percent of
households with a vehicle are low income.” (Tomer, 2011)
Employment is difficult as residents struggle to find childcare and reliable transportation
or they are initially skipped over due to a permanent criminal record. This makes it nearly
impossible to find reliable and sustainable work outside of the crime industry. To this end
President Obama began working to influence “ban the box”(Whitehouse.gov, 2015)
legislation, a measure meant to prevent employment discrimination against those with a
criminal record in November 2015.

25. 25
Class segregation also affects the distribution of public resources within an urban
center. This includes the creation and upkeep of public spaces within the different
residential areas as well as the resources directed toward the various administrative
districts. Ascetically pleasing public gathering places are essential to the vibrancy and
connectedness of a community. One only has to glance at the examples of the public
Luxemburg and Tuileries gardens in cities like Paris to see the role they play in igniting,
creativity, imagination and overall well being and quality of life in its citizens. We now
turn to examine the role of race and racial discrimination within this multi-facted and
complex story.
Race
There is a layer of invisibility that surrounds the narrative of racial minorities in
the United States. Along with gender inequality this invisibility is combined with a
socialized inferiority that is both internalized into and projected onto members of racial
minorities in the United States. This is particularly true of Hispanics and African-
Americans. The negative stereotypes reinforced by the media often focus on a single
story of poverty, criminality, drugs, teen pregnancy and high school dropouts. The odd
exceptionally talented rapper, sports star, dancer or singer who miraculously overcomes
their circumstances to gain success and renown is the exception rather than the
expectation. This narrative has helped to paralyze another generation of racial minorities.
While the inequality gap increases, this story has expanded to include the working class
and those living below the poverty line regardless of race. As with ‘white flight’ the
residential and social racial segregation of the Jim Crow South has now become a class
based segregation encompassing all areas of life. This is seen on a progressively extreme

26. 26
scale specifically when examined against the ever-decreasing prospect of social mobility
and closing the opportunity gap when it comes to achieving success commonly defined as
the American dream.
The introduction of the Black Lives Matter movement into the mainstream
dialogue began in part as a response to numerous accusations of racial bias in cases of
extreme police brutality. However the movement serves as a wide platform to protest
against the current accepted and legalized forms of racial discrimination and to give a
voice and face to the frustration and fear felt by many in the African-American
community. Michelle Alexander in her work, The New Jim Crow, refers to the system of
mass incarceration as the third stage of systemic and institutionalized oppression against
African Americans. She includes it in the same category as the Jim Crow laws of the
segregated south and the institution of slavery prior to that. While slavery precedes the
timeline of this study’s narrative it is crucial to have a basic understanding of how it
relates to the sociology and socialization of race in America. Race rather than socio-
economic status became the dividing line between slaves and the working class when the
wealthy slave owners became fearful that alliances forming between poor whites and
black slaves might lead to revolt and rebellion. In response to this fear they created a
division in this coalition by appointing poor whites to ‘prestigious’ positions as foremen
and overseers in lieu of working alongside their black counterparts at more ‘menial’
tasks. (Glen, 2002 61-62, 66-68, 73, 87; Alexander, 2010, Ch 1) As slavery became
illegal and in the aftermath of the Civil War a set of laws known as ‘Jim Crow’,
mentioned above, eventually emerged creating a ‘separate but equal’ model where
institutions and public services could be separated by color provided they were

27. 27
comparable. (“Racial Segregation”, n.d.) The History Channel’s profile on this period
shares, “the promised freedoms of Abraham Lincoln were lost by both failing to enforce
equality, and by accepting the…Jim Crow laws.” (“Racial Segregation”, n.d.) They
elaborate on the consequences, sharing how the quality of these services varied in a
racially dependent manner citing schools as one example of how black institutions were
held to a lower standard than their white counterpart. The History Chanel also looks at
the geographic component of racial segregation in their profile, pointing out,
“At this point 90% of African Americans lived in the South, dispersed amongst
the countryside…By 1965, having often migrated along the new Interstate
Highway, 80% of African Americans now lived in cities, but often concentrated
together in slums…In 1954, it was reported…that America had outlawed
segregation and in 1955, the Supreme Court said that segregated education should
be ended. But ten years later, more than 75% of the school districts remained
segregated and one half of the black population was below the poverty line.”
(“Racial Segregation” n.d.)
This standard differentiation is still seen today when examining the qualities of under-
performing versus performing elementary and secondary schools. Nikole Hannah-Jones
examines this in her in-depth profile. She uses one example from the city of Tuscaloosa
to illustrate the extent to which racial segregation continues to exist in the education
system. She shares that some fifteen years ago, a federal judge repealed the, “court-
ordered desegregation mandate that had governed [the city’s schools] for a single
generation” in response to the district’s argument that the school had been fully and
successfully integrated and, “could be trusted to manage that success going forward.” Yet
when Tuscaloosa’s schools were released from the court order, they “seemed to move
backwards in time.” The “citywide integrated high school [was] replaced by three smaller
schools” and as Hannah Jones describes, “[the former] retains the name of the old
powerhouse, but nothing more. A struggling school serving the city’s poorest part of

28. 28
town, it is 99 percent black.” The ramifications of this were immense with one of the
subjects of the article –“D’Leisha, an honors student since middle school” – “[having]
only marginal college prospects”. Meanwhile, “predominantly white neighborhoods
adjacent to [the school] have been gerrymandered into the attendance zones of other
whiter schools.” She concludes by arguing that,
while segregation as it is practiced today may be different than it was 60 years
ago, it is no less pernicious: [the current model] involves the removal and
isolation of poor black and Latino students, in particular, from everyone else…
today, nearly one in three black students attends a school that looks as if Brown v.
Board of Education never happened…the Obama administration, while saying
integration is important, offers almost no incentives that would entice school
districts to increase it. Instead… districts have typically gerrymandered “to
segregate, particularly whites from blacks,” and that gerrymandering is “getting
worse …” as federal oversight diminishes. According to [one analysis] the
number of apartheid schools nationwide has mushroomed from 2,762 in 1988-the
peak of school integration- to 6,727 in 2011.” (Hannah-Jones, 2014)
African Americans are the common example of mistreated minorities but they are not the
only group to suffer the prejudice, discrimination and bias that play a role in contributing
to an inequality gap where minorities are over-represented on the losing end. There are a
number of reasons for this. While many stem from a socialized prejudice many more are
a result of political actions and policies enacted toward making life more difficult for
minorities. This is done in part to appease citizens who hold biased views and are more
likely to show up to the polls. Additionally history has repeatedly shown us fear and hate
are much more effective, albeit unsustainable, motivators and incentives than are
empathy and trust.
Minorities, specifically African-Americans and Latinos are more likely to end up
in the situations that correlate to poverty, namely teen pregnancy, incarceration and lack
of higher education among others. It is difficult to find successful minority role models

29. 29
both in mainstream media as well as in the general public and as with women they are
held to impossible standards and judged by their failures rather than their successes. This
double standard makes it virtually impossible to close the opportunity gap and rise to the
high level positions where equal pay for equal work is closer to a reality. This is because
those at the top are predominantly childless single women or middle aged white men with
a non-working spouse, those of whom are in positions of being able to put in the hours
and energy required to ‘succeed’.
Another area where race becomes a factor is in the political arena. When it comes
to tying disenfranchisement to incarceration it allows for racial discrimination and a
skewed representation of the voting public. (Bowers and Preuhs, 2009) This is critical to
understand because it is the voting public whose interests theoretically dictate future
legislation and- with the advent of public discourse via the Internet and social media
often do- determine policy positions and electoral platforms to some degree. A significant
portion of the controversy surrounding mass incarceration, which we now turn to, centers
on allegations of racial discrimination.
Crime and Incarceration
Historical Context of Criminal Activity, Crime Rates & Sentencing Policy
The criminal justice system has experienced a period of “mass incarceration” over
the past forty years–this term refers to the decades following the 70’s - where the
incarceration rate spiraled but the crime rate held steady. In recent research it has also
been referred to as ‘the New Jim Crow’ due to undertones of racial discrimination in the
criminal justice system as more African Americans are incarcerated per capita because of

30. 30
drug related crimes and sentencing structure. Todd Clear in his work Incarcerating
Communities expands on this, affirming,
Regarding the period between 1980 and 2001, Blumstein and Beck conclude:
Growth in incarceration is attributable first to the 10-fold increase since 1980 in
incarceration rates for drug offenses. Beyond drugs no contribution to that
increase is associated with increases in crime rates or increases in police
effectiveness as measured by arrests per crime. Rather, the entire growth is
attributable to sentencing broadly defined – roughly equally to increases in
commitments to prison per arrest…and to increases in time served in prison,
including time served for parole violation.” (Clear, 2007)
Understanding the relationship between drug related crimes and racial discrimination
when it comes to looking at the system and institution of incarceration, specifically mass
incarceration, as it exists today is essential to connecting the dots when it comes to how
mass incarceration predominantly affects the poor, particularly those of color.
Incarceration
Incarceration is a critical point of examination in the inequality discussion
because, as with social mobility, it has become, “an aspect of life passed on from
generation to generation.” (Clear, 2007) This is in part because in every year since 1973
the prison population has increased, despite many changing variables including periods of
war and peace and both Democratic and Republican presidential administrations. It has
also proved the only constant of the post civil rights generation. The United States is
unique in respect to the number of incarcerated citizens per 100,000 when compared to
their neighbors with the US imprisoning 724 persons per 100,000 while Canada detains
145 and Mexico 191 using the same method of calculation-imperative due to significant
population variances. (Clear, 2007) When compared globally the US faces even more
disparity with France imprisoning 88 people and China 118 per 100,000 respectively.

31. 31
Even during South African Apartheid there were only 344 persons per 100,000
incarcerated.
Investigating the prison experience is important particularly because when
compared to more rehabilitative rather than penal motivated programs- prison does
something to a person that damages their chances of remaining outside the correctional
system. As Clear, put it, “Imprisonment has grown to the point that it now produces the
very social problems on which it feeds. It is the perfect storm.” (Clear, 2007) This occurs
for a variety of reasons not least of which is that perceptions are one thing while actual
experiences are another. This can translate into a dynamic where prison becomes a ‘safe’
environment – in comparison to life on the streets. Or at the very least there is a sense of
familiarity attached to the prison environment by those who have been incarcerated. In
other words, once prison is no longer an unknown it is feared less and those who have
committed prior felonies become more likely to act in ways that can lead to recidivism.
This is because the theoretical threat of the unknown variable -in this case prison- has
now been experienced and understood as a reality and thus is no longer threatening
because one has survived it. Clear also explains that people who think they will get
caught are less likely to commit crimes. This implies that an increase in punishment
levels does not reduce crime through general deterrence mechanisms. (Clear, 2007) It is
also important to note, as Clear points out, that because of current socialization,
“when a potential lawbreaker sees sanction as unfair and experiences its
imposition as personal rejection rather than a consequence of violating the law,
then threat and experience of severe punishment generate not compliance with
law but rather defiance of it. [This] suggests [there is a] limited potency of
punishment [and that it] cannot be overcome merely by increasing [penalties]
because heavier [penalties can be] perceived as unfairly harsh generating further
defiance.” (Clear, 2007)

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This is also seen in the saturated ‘poverty mentality’ that often takes over a community
dealing with issues of widespread poverty, crime, incarceration and recidivism leaving its
residents struggling with low-self esteem and feelings of helplessness and abandonment.
These communities often suffer from a low local service quality, negative shared and
accepted social norms, peer influences, social controls, escalated crime and violence-in
comparison to neighborhoods with a higher median socio-economic status -and limited
job access which among other factors are disabling to communal health and productivity.
Clear illustrates some of the consequences that the revolving door of incarceration brings
to the larger community from which prisoners leave from and return to. These include:
the effects of prolonged and repeated absences of people from their community and
support network, limited employment chances, and stripped voting rights after
incarceration -all of which can factor into increased recidivism rates. Children whose
mothers are imprisoned also frequently move to live with a new caregiver during their
parents’ incarceration. This is harmful because changing environments, most of which
are likely of lower quality for many reasons, particularly because they are not residing
with a biological parent.
Additionally prison populations are primarily comprised of poor people who are
legally prohibited from voting due to their incarcerated status. (Bowers and Preuhs, 2009)
Because they ‘do not matter’ politically it is difficult for those in prison to have a public
voice and speak out. Further, their record upon their release often limits their credibility
and permanently prohibits their ability for political and social activism, in addition to the
difficulty of finding permanent, legal, employment in which they can create a healthy

33. 33
financial future. This then brings us to examine the ways in which the financial industry
and political machine have contributed to the increase in inequality over the past decades.

34. 34
3. Political and Economic Inequality
Politics and economics have always been ‘hot button’ issues in many realms of
American public discourse. When it comes to economic inequality their role has even
more impact. In examining America’s roots to link the past to the present one discovers
the extent to which today’s America, particularly in its civic dialogue, political machinery
and financial sector, is influenced by its founding values of capitalism, individualism and
‘freedom’ at whatever cost.
This independent streak has both allowed for progressive ingenuity as well as
moral failings when it comes to caring for the poor. Poor people pay less in taxes,
(DeSilver, 2015) they are less likely to vote, (Pew Research Center for the People and the
Press, 2015) and are thus less likely to be politically represented as individuals and as a
larger group. (Bartels, 2005) This is not a new concept to Americans familiar with its
early history. As the old rally cry went “no taxation without representation” (Continental
Congress, 1774). Unequal representation is in itself perhaps the most significant obstacle
to equality. The poor also receive less pay for more physically demanding labor in a
country where the minimum wage ranges from $5.15 per hour in Georgia to $10 per hour
in California and Massachusetts. (NCSL, 2016) The case is often made that those who
have accumulated wealth worked hard for it and earned it, while poor people –those
reliant on the welfare system- are lazy and entitled and thus do not or would not spend
any state provided income wisely. Barbara Ehrenreich points out in a piece for the
Atlantic that this mainstream narrative has been around for “at least the past fifty years”
with analysts and elected officials “[bemoaning] the character failings and bad habits of
the poor” and identifying them as “shiftless, irresponsible and prone to addiction, [having

35. 35
too many children and [failing] to get married.” She shares how by the 80’s the right
wing had built its stance on poverty around the popular idea that- “poverty is caused not
by low wages or a lack of jobs and education, but by the bad attitudes and faulty lifestyles
of the poor.” Her summary of the right’s position concludes with sharing its justification,
namely that, “if [the poor do] suffer from grievous material deprivation, if they run out of
money between paychecks, if they do not always have food on their tables- then they
have no one to blame but themselves.” (Ehrenreich, 2014) This, however, fails to take
into account the benefits of and economic savings of living a lifestyle that enables long
term planning versus a day-to-day survival mode. (Peters, 2016) Ehenreich confirms this,
explaining how the Great Recession changed this mentality for many who found
themselves in personal financial crisis as a result of the economic crash. She shares that,
“The Great Recession should have put the victim-blaming theory of poverty to
rest. In the space of only a few months, millions of people entered the ranks of the
officially poor – not only laid off blue-collar workers, but also downsized tech
workers, managers, lawyers and other once- comfortable professionals. No one
could accuse these “noveau poor” Americans of having made bad choices or bad
lifestyle decisions. They were educated, hardworking and ambitious, and now
they were also poor – applying for food stamps, showing up in shelters, lining up
for entry-level jobs in retail. This would have been the moments for the pundits to
finally admit the truth: Poverty is not a character failing or a lack of motivation.
Poverty is a shortage of money…” (Ehrenreich, 2014)
A report from United for a Fair Economy titled Born on Third Base: What the Forbes
400 Really Says About Economic Equality and Opportunity in America confirms that the
attainment of the “American dream” has been skewed to favor those with wealth or
access to the -difficult to infiltrate- social networks able to provide the necessary
opportunities and resources for ‘success’ often determined as ‘upward mobility’. They
illustrate this by comparing the backgrounds and origins of the Forbes 400 wealthiest
people in 2011 to a baseball game where

36. 36
“35% [of those on the list were] born in the batter’s box -individuals who came
from a lower-or middle-class background, 22% [were] born on first base –
individuals who had opportunities that gave them an advantage, such as an upper-
class background, inherited less than $1 million, or received some start-up capital
from a family member, 11.5% [were] born on second base –[those who] inherited
a medium-sized business or wealth of more than $1 million or received substantial
start-up capital for a business from a family member, 7% [were] born on third
base [and] inherited wealth in excess of $50 million or a large and prosperous
company, 21.25% [were] born on home plate [and] inherited sufficient wealth to
make the Forbes 400 list [while] 3.25% [were] undetermined.” (Moriarty, 2012)
In order to fully understand how the sharp division in labor, earnings, net worth and
political representation between the rich and poor came about, and the extent of its
consequences, it is important to examine the history, influence and impact of the closely
connected financial and political sectors.
Since its genesis, the financial industry has played a significant role in the life of
the nation as its ebbs and flows have heavily dictated the economy and thus the welfare
of American citizens. Due to this it is it is imperative to this discussion to examine the
rises and falls of the financial sector. We begin by looking at the ten-year period
commonly referred to as the ‘roaring twenties’ (Zeitz, n.d.). This was a decade of
prosperity and indulgence- at least for those on the upper end of the unprecedented
wealth gap that was due in part to the post war industrial boom (U.S. History in Context,
2003, Zeitz, n.d.). This prolonged period of wealth and prestige was interrupted by ‘Black
Tuesday’ in the fall of 1929 when the stock market crashed due predominantly to a lack
of regulations and overinvestment (PBS, n.d.) America and the world then entered into a
decade long period of economic depression aptly known as the Great Depression.
Combined with a prolonged drought in a primarily agriculture based economy, the 1929
crash led to mass poverty and strife. In 1932, three years after ‘Black Tuesday’, Congress
passed a bill titled the Glass-Steagall Act, (Archive.org, 1933) which served to put in

37. 37
place regulations and restrictions limiting the powers of corporate entities. As fate would
have it, a few years later another mass war on a global scale would change the
international balance of power and reignite the now struggling American economy.
World War II and FDR’s progressive ‘New Deal’ (Pbs.org: ‘The New Deal’) served to
steer the economy out of the Great Depression toward a time of more controlled growth,
unlike the unregulated post war economy of the roaring twenties that had followed the
First World War.
In the decades that followed manufacturing continued to play a major role in the
American economy. Many households bought into the relatively recent consumerism
model (Beder, 2004)-that is- “the consumption of goods and services in excess of one’s
basic needs, usually in greater and greater quantities” (www.edu.gov.mb.ca, n.d.) –
purchasing labor reducing, assembly line products, such as washing machines and
automobiles, (Pbs.org: ‘The Rise of American Consumerism’). With this decades-long
booming and prosperous industrial economy the stock market also enjoyed significant
growth and began pursuing deregulation policies in the early 1970’s.
The 1970’s are perhaps the most important period to examine in regards to the
influence of economics and legislation in expanding the inequality gap. This is because
widespread de-regulation across various sectors began then and continues today. Those in
favor of de-regulation argue that it increases competitiveness in the marketplace and as a
result increases quality and/or decreases price. Robert Crandall expands on the degree to
which de-regulation has amplified, sharing,
“The 25-year deregulation movement that began in the 1970s had a remarkable
impact on the United States and many other countries. In the United States, the
entire national transportation sector was substantially deregulated; the energy,
financial, and video distribution sectors were heavily deregulated; and even

38. 38
telecommunications witnessed considerable deregulation and regulatory reform.
About two-thirds of the communications sector (including long distance services,
broadband services, telephone terminal equipment, and cable television) has been
deregulated, while local telephone service and broadcasting are still regulated.
Overall, the amount of regulation has fallen by roughly 74 percent.” (Crandall,
2008)
For the purposes of this examination we look particularly at financial deregulation, as the
lack of limitations on this sector has consistently been linked to the financial crises-
including the housing crash- that have occurred since. Among the many areas where the
general public, and particularly the working class, suffered consequences as a result of
this phenomenon was in the increase of limits on maximum interest rates. Matthew
Sherman outlines how this happened and its effects on the inequality gap in his account,
A Short History Of Financial Deregulation In The United States. He shares that in the
years following the Great Depression restrictions were introduced in regards to the
interest rates banks were allowed to charge on deposit accounts while checking accounts
were fully controlled with an interest rate limit of zero. He details that, “Under
Regulation Q of the Banking Act of 1933, savings accounts were capped at 5.25 percent,
and time deposits were limited to between 5.75 and 7.75 percent, depending on
maturity.” (Sherman, 2009) Sherman describes the intention behind regulating interest
rates, sharing that it was meant to prevent “wars at exorbitant levels”, but that exceptions
were made for banking institutions that concentrated on mortgage lending. He clarifies
that “in order to encourage mortgage lending within local communities, thrift institutions
were allowed to offer deposit accounts interest rates a quarter-percent higher than banks.”
(Sherman, 2009) One problem this caused was when in the late 1970’s inflation triggered
a hike in market interest rates to the point that it rose above the dictated limits of
Regulation Q. The regulations that had been put in place -while practical when there was

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a 3 or 4 percent rate of inflation- were less sensible when the interest rate hovered around
10 or 11 percent as “investors began to seek out and find alternatives to traditional
deposit accounts” (Sherman, 2009) due to these preexisting restrictions. He goes on to
explain the intricacies of this process, describing how,
“In the commercial paper market, investors could lend directly to borrowers,
bypassing banks as intermediaries. Brokerage firms and other financial
institutions began to create money market mutual funds, which pooled small
investors’ funds to purchase commercial paper. These…operated without reserve
requirements or restrictions on rates of return.” (Sherman, 2009)
He then illustrates how this ‘go-around’ was soon adopted by “small investors who
shifted their money out of regulated accounts in depositary institutions which paid
considerably lower interest rates.” (Sherman, 2009) He also highlights how President
Carter authorized the Depository Institutions and Monetary Control Act (DIDMCA) in
1980, which created a group to “oversee the complete phase-out of interest rate ceilings
within six years [and that] depository institutions would be allowed to offer accounts with
competitive rates of return in the market.” (Sherman, 2009) The goal was that this would
“[allow] banks and savings and loans to compete with money market mutual funds”
(Sherman, 2009) Interest rates, while significant, are just one part of the mass
deregulation [of the financial industry] that took place during that period which
subsequently and drastically altered the way many working and middle class Americans
viewed their finances. This paper uses interest rates as the example due to its role in the
creation of the present inequality gap. The importance of interest rates is exemplified in
their contribution to the sub-prime mortgage crisis as Katalina Bianco expertly explains,
“Many economists believe that the U.S. housing bubble was caused in part
by historically low interest rates. In response to the crash of the dot-com bubble
in 2000 and the subsequent recession that began in 2001, the Federal Reserve
Board cut short-term interest rates from about 6.5 percent to 1 percent. Greenspan

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admitted in 2007 that the housing bubble was “fundamentally engendered by the
decline in real long-term interest rates.”” (Bianco, 2008)
Interest rates were also important with regard to credit cards when they began to emerge
and gain a hold in the mainstream market during the period of deregulation, stimulating
the economy with an increased standard of living accompanied by a corresponding
escalation in consumer and household debt. We now turn back to the historical narrative.
In the 1980’s a strong economy, the deregulation of Wall Street and a popular
Conservative Republican president Reagan in office along with the slowly transitioning
economy from one of manufacturing and industry played a role in decreasing the middle
class and creating class based divisions in most realms of life. Bill Clinton continued the
process of deregulation with his partial repeal of Glass- Steagall in 1999. (Labaton, 1999)
This act helped to create the necessary conditions that led to the housing bubble and the
resulting 2007-2009 financial crash (Goldstein, 2016). The recession changed reality and
expectations seemingly in an instant, most significantly for those in the working and
middle class. Millions lost their homes, their jobs and their economic security-retirement
savings, pensions and social security. The relationship between Wall Street and
Washington that helped to instigate the crash demands further inspection and so we will
now look at the role politics has played in increasing inequality levels.
Politics and economics have always been closely related. The popular saying
‘money talks’ is particularly applicable to this relationship in the US, especially in recent
decades. One simply has to look to laws, or lack there of, in regards to the regulation of
lobbyists, particularly those employed by the financial industry. Donald Trump, for
instance, has recently offered examples of and admittance to his own financial donations
to politicians as purely transactional in exchange for political favors (Ornitz and Struyk,

41. 41
2015) while according to one New York Times article from early 2015, the Koch
brothers planned to spend $889 million dollars leading up to the 2016 election, double
what they spent in 2012 and significantly more than either the Democratic or Republican
political establishment. (Confessore, 2015) These outside influences, particularly those
with deep pockets, rig ‘the game’ as it were. Elizabeth Warren, former Harvard Law
professor and current US Senator for the state of Massachusetts repeatedly points to these
–toxic to the public- relationships between Washington and Wall Street as contributing to
the inequality gap, explaining,
“Washington is wired to work for the big guys, the ones who can hire armies of
lobbyists and lawyers. It is essential that we find ways to counteract the effects of
Citizens United, the Supreme Court case that authorized the big corporations who
have been openly gaming the system in Washington to gain an even bigger
advantage by funding-often anonymously–political advertisements. This decision
was a corporate end-run around bipartisan campaign finance reform.” (Warren,
2015)
This means political candidates must now have access to both Super PACS and
endorsements in order to mount viable campaigns and be elected. This opposes what
Abraham Lincoln famously stated in the Gettysburg address, namely that, “government
of the people, by the people, for the people shall not perish from the earth.” (Lincoln,
1863) It presents an odd dichotomy in a democracy, particularly during this election
cycle. This is because candidates, such as Hillary Clinton and Ted Cruz, whose
campaigns rely heavily on wealthy financial backers and Super PACs, must try and tailor
themselves to appeal to a general voting public tired of the Washington establishment and
their close ties to Wall Street, with theoretical platforms that include, on Clinton’s part,
the intent to,
“overturn Citizens United, end secret, unaccountable money in politics,
establish a small-donor matching system to amplify the voices of everyday

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Americans , give working families a raise, and tax relief that helps them manage
rising costs, create good paying jobs and get pay rising by investing in
infrastructure…close corporate tax loopholes and make the most fortunate pay
their fair share.”(Hillaryclinton.com, 2016)
Meanwhile Cruz on the Republican side, whose website shares he believes in a simple
flat tax rate of 10% (Cruz for President, 2016) states his goal is to rein in Washington by,
“shrink[ing] the size and power of the federal government, the Cruz Five for
Freedom plan eliminates the IRS, the Department of Education, the Department
of Energy, the Department of Commerce, and the Department of Housing and
Urban Development. As President, Ted Cruz will appoint heads of each of those
agencies whose sole charge will be to wind them down and determine whether
any programs need to be preserved.”(Cruz for President, 2016)
As one can see, these candidates are more aligned with their party’s -as in the case of
Hillary- or sponsors values- as with Cruz, than their personal choices and circumstances.
It is thus easy to see how partisanship and ideological division are then a more critical
factor when it comes to influencing early platform positions in order to appeal to more
broad demographic groups. On the other hand it is also easy to see the influence of ‘big
money’ sponsored full time Washington lobbyists in the actual legislation that occurs in
the four years between the now almost circus-esque presidential campaigns.
We now turn to review how we have arrived here and begin to offer some
solutions in reducing the economic gap as we move forward. From what we have
examined thus far one could argue America in its present situation is beyond compare.
However, one simply has to look to the efforts of individuals, neighborhood associations,
local community organizers and national advocacy groups to see that there are still ‘small
groups of thoughtful, committed citizens changing the world’ (Mead, n.d.)

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4. Conclusion
As has been demonstrated, America has created a caste system that while
influenced by historical and present racial prejudice and discrimination is now largely
based on socio-economic status. It may sound too harsh a term to those who benefit from
its advantages but for those who live in day to day survival mode on the lowest level, it is
likely far too inadequate. Spending any time at all in a neighborhood aversely affected by
the challenges discussed, it is easy to see how this system emerged and why it continues.
Observing the ‘available men’, often seen with one hand pulling up their pants barely
covering their crotch while loitering outside the latest popular ‘hang-out’ it is particularly
evident why many poor women have chosen single parenthood over partnering with their
male counterparts, many of whom also rotate in and out of prison (Clear, 2007)
This paper has attempted to illustrate that income inequality is not simply a
theoretical, academic discussion of stats, figures and numbers. It affects the every day
lives of millions of people in the United States, specifically in the way it essentially
creates two different tracks or life courses for the ‘average American’ based on their
socio-economic status. The wealthiest elite’s ‘earnings’ afford them the privilege of
avoiding any interaction with the poor, while the underprivileged live paycheck to
paycheck barely able to keep from drowning under the enormity of emergencies the
former would determine ‘inconvenient’ at most. This is because, as we have seen, they
have the resources, social capital and education to quickly navigate and move on from
such ‘disruptions’. Poor folk can struggle their entire lives to move past just a few of
these circumstances. However, as has been a recurring theme throughout this paper,
poverty is expensive and these unforeseen incidents are often more prevalent among the

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poor than the wealthy. This is because the affluent are able to avoid them by being
proactive rather than reactive when it comes to maintaining overall health and quality of
life. This class-influenced perspective and mentality affects everything from vehicle and
home maintenance and repairs that effectively eliminate the possibility of bigger ones to
regular exercise, healthy eating and doctor visits. As a result, this effectively allows the
wealthy-for the most part- to avoid medical emergencies or long-term health issues such
as increased risk for a stroke, heart attack or diabetes. To this end, it is essential that
proposed solutions to inequality be sustainable, empowering and inclusive -serving to
heal the polarized us versus them racial and socio-economic narrative too prevalent in the
country’s present social and political culture.
Sociological Reforms
The United States has simultaneously and traditionally leant itself toward a more
conservative and capitalistic approach toward the social welfare state than their Western
counterparts. This has resulted in them holding the dubious title of being the only OCED
country, other than Mexico, without universal health care (The Commonwealth Fund,
2015). They are also among only a handful of nations globally without some type of
guaranteed paid parental leave program. (NPR, 2015) Progressive solutions to address the
sociological components of inequality have been presented, adopted and/or implemented
in similarly developed but more equal states. These approaches include Finland’s
proposed minimum income experiment and traditional baby boxes (Andersson and
Kangas, 2002; Lee, 2013) Making post-secondary education accessible to poor students
who do graduate through tuition free community colleges, a renewed focus on trades and
apprenticeship programs and finding ways to make the STEM (Science, Technology,

45. 45
Engineering and Math) (Ed.gov, n.d.) fields more accessible to prospective first
generation college students have also been put forth as policy solutions. One could argue
the implementation of at least a few of these ideas is crucial to filling the demand for
highly skilled workers in today and tomorrow’s economy, particularly when, according to
Cathy Davidson’s Now You See It, “65 percent of children entering grade school this
year will end up working in careers that haven’t even been invented yet.” (Davidson,
2011, 18) In considering ways to make joining the ranks of the middle class accessible
ways for poor single working moms it is important to consider how the implementation
of a universal high quality childcare program would help to close the gap. In their report
for the New Economics Foundation, Helen Kersley and Faiza Shaheen propose,
“[the] universal provision of high-quality childcare that ensures availability to all
children and their families on an equal basis, regardless of location, employment
or income status…[where] pay for childcare workers is set at a minimum of the
living wage, with terms and conditions of employment to ensure stable contracts
with defined hours and career and pay progression opportunities.” (Kersley and
Shaheen, 2014)
Quality and consistent childcare is important across socio-economic levels, because for
working parents it is the difference between successful or sub-par performance at work-
based on one’s ability to access it. Evening the playing field in this regard would go a
great deal toward ensuring everyone is equally able to perform at a level where they are
able to gain entry to fields with a career track, promotions or bonuses based on job
performance. Investing in transportation infrastructure in addition to universal childcare
would also go a long way in providing job security for the majority of the poor working
class. The employer would also benefit because -as one would naturally assume- when
employees are content at their present job –which is often a result of having access to
resources that enable them to easily access their workplace and successfully perform their

46. 46
duties without unnecessary outside stressors- it ensures consistency and frequently
reduces company transition and turnover as a whole because employees are not then
searching out other employment options closer to home with better benefits, or with more
flexibility to their needs and the demands that come with the day-to-day survival lifestyle
Quality and long term employment is beneficial for society as a whole,
particularly when one considers the correlation between crime rates in neighborhoods
with low employment rates (Izadi, 2012; Ward, 2013) When it comes to policy and
legislation concerning crime,
“Many independent experts believe that because U.S. drug control efforts
aim to curtail supply rather than demand, they cannot help but be futile as
well as unfair…They have proposed alternative measures, e.g. increased
substance abuse treatment, drug education, and positive social investments
in low income neighborhoods, to respond to public concerns about drug
dealing and drug abuse…Some states have begun to take steps in the right
direction, diverting drug offenders from prison into community-based
treatment programs, modifying their sentencing laws, and commissioning
studies of racial disparities in their criminal justice systems.” (Fellner,
2009)
A forward thinking initiative known as the Drug Market Intervention has recently been
introduced and proven effective, having been successfully implemented in 37 specific
neighborhoods nationwide. (Westsidecommunities.org, n.d.) The program’s website
describes the motivation behind the action, stating,
“Open-air drug markets and drug enforcement have exacted a heavy toll on poor
and minority neighborhoods. Drug markets reflect and exacerbate breakdown in
community social control characterized by disorder, crime, and fear of crime. As
drug dealers exert control over public space, residents withdraw.”
They also admit to ineffectiveness of past policy initiatives that produced the current
atmosphere of fear, intimidation and resulting animosity between police officers and
those they are both charged with detaining and protecting, explaining that,

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“four decades of drug enforcement have resulted in cycles of enforcement from
which large numbers of young dealers are incarcerated only to be replaced by a
new group of young people drawn to the economic rewards of drug sales.”
Further, in plain terms, they demonstrate the role racial discrimination has played in
‘front-line’ criminal justice, particularly in areas actively involved in the drug trade,
clarifying that,
“The reality that the sellers involved in open-air drug markets, who comprise the
majority of incarcerated drug offenders, are disproportionately people of color,
whereas the buyers are often white and non-local, is also a source of conflict and
suspicion between law enforcement and residents of these neighborhoods.
They then illustrate the ways in which “the Drug Market Initiative (DMI) represents a
“new way” of dealing with open-air drug markets.” (Michigan State University School of
Criminal Justice Drug Market Intervention Training and Technical Assistance Program,
(MSUSCJ DMITTAP) 2016) explaining how this policy actively works to address past
policy miscalculations and combat the many specific consequences of drug related crime
and mass incarceration –an incredibly complex and multi-faceted issue –in an attempt to
sustainably tackle and, over the long-term, reverse the steady progression seen in recent
decades. Their mission statement shares that,
“DMI is a strategic problem-solving initiative aimed at permanently closing down
open-air drug markets and the associated crime, violence, and disorder that has
proven challenging for communities and law enforcement for decades. The
strategy targets individual geographic-based drug markets using a focused
deterrence approach, specifically targeting drug dealers in those areas. The most
violent offenders are targeted and prosecuted to demonstrate what will happen if
one persists selling drugs and committing serious crimes in the area.” (MSUSCJ
DMITTAP, 2016)
They then explain the holistic approach of this new initiative specifying how,
“The strategy then stages an intervention with the low level offenders, their
families/influentials, and community members. Law enforcement mobilizes
community residents, leaders, and family members of low-level drug dealers to

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voice their intolerance for this criminal behavior and to create opportunity and
support for these offenders in changing their behavior.” (MSUSCJ DMITTAP,
2016)
Finally, they elaborate on both the positive and negative reinforcements presented to
offenders, who do not cooperate within the previous stages of the initiative, clarifying
that,
“With [the] backing [of community influencers], offenders are given no choice
but to stop dealing drugs or face the maximum penalties allowed. This ultimatum
is coupled with support in the manner of access to services such as job training,
housing, transportation, and health care.” (MSUSCJ DMITTAP, 2016)
Washington has also introduced other attempts such as the Fair Sentencing Act that
passed in 2001, to reverse the phenomenon of mass incarceration. The Act, as Andrew
Oravecz in his article, Calling for Progress: Racial Inequality and Criminal Justice
Reform, describes,
“brought the sentencing ratio between crack and powder cocaine down from
100:1 to 18:1, but further action still needs to be taken. The proposed Smarter
Sentencing Act of 2015 (S.502/H.R.920), introduced by a bipartisan group of
lawmakers…would have a multitude of beneficial impacts on the criminal justice
system. First, it would allow the Fair Sentencing Act to be applied retroactively,
making thousands of convicts eligible for sentencing reviews. In addition, the bill
would restrict the use of mandatory-minimum sentencing rules that require
lengthy prison terms regardless of the circumstances in a given case.” (Oravecz,
2015)
Drug related crime, sentencing and mass incarceration policies must be focused and
implemented in such a way that they incorporate steps toward reconciliation. They must
seek to address its racially discriminative component while maintaining a consistent
standard of operation, in line with the national social contract, that punishes socially
destructive deeds. Additionally they should attempt to reduce the strain on the prison
system and low-income communities by reducing the prison population in healthy and
constructive ways. There have been numerous other sociologically related proposals

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offered in response to current inequality. However, due to time and space constraints,
only a few are included here. Nevertheless, it is important to note that, without holistic
vision, vigorous implementation of such proposals, and a shift in socialization and
attitudes toward both poverty and those who suffer under its constraints, any one policy
fails to adequately address or reverse what has become such a widespread and
devastating experience for those on the wrong end of the dividing line.
Financial and Political Reforms
Economics and politics, as has been noted, are also key pieces to solving
inequality. They are central components to generating, initiating and enacting feasible
solutions to the conditions that have led to and sustain the opportunity gap as well as
raising public awareness of and response to said inequality. This requires not only
repealing past legislation, and challenging social stigmas and oppressive biases but also
creating programs and environments that encourage empathy and inclusiveness. This
starts by initiating and implementing long term realistic changes into the hyper
competitive economic sector and polarized political sphere. Various groups and
politicians have begun to propose and support a national minimum wage of $15/hour
(Raisetheminimumwage.org, 2016) that would allow the working class to earn a living
wage and generate economic growth among other benefits. John Powell in his work at the
Berkeley Diversity Initiative shares six policies that assist with alleviating inequality.
Among others, they suggest that even increasing the federal minimum wage to $10.10/
hour would raise 4.6 million people out of poverty. (Powell, 2014) He also believe in the
benefits of tax reform measures and improvements to the earned income tax credit -such
as augmentation and expansion- considering them to not only have economic but also

50. 50
sociological paybacks citing, “In recent years, the tax credit has lifted roughly 4.7 million
children above the poverty line annually…[and has] correlated with improvements in
maternal and infant health [and] higher cognitive achievement in children” (Powell,
2014) Further, he mentions asset creation and management as important key steps,
affirming,
“Policies that encourage higher savings rates and lower the cost of building assets
for working and middle class households can provide better economic security for
struggling families. New programs that automatically enroll workers in retirement
plans and provide a savings credit or a federal match for retirement savings
accounts could help lower-income households build wealth. Access to fair, low-
cost financial services and homeownership are also important pathways to
wealth.” (Powell, 2014)
Asset building is key because it allows for wealth to be passed down through generations,
helping children and grandchildren weather emergencies or begin to build a nest egg of
their own through education, homeownership or further investments. This helps to ensure
the family remains at or gains access to a higher standard of living. However because of
the long-term planning and thinking required for financial investing, the poor rarely
receive this type of starting gift or initial step up in early adulthood, arguably when it is
most needed, to begin to build a life and climb out of or maintain one’s position in a
certain socio-economic demographic.
On the political side, there is an argument to be made for electoral reform,
particularly when it comes to regulating the financing of campaigns. Heavy financial
backing for campaigns, whether by individuals or national corporations, is destructive to
a democracy for many reasons. Most significantly because it essentially eliminates the
concept of an even playing field that provides the opportunity to anyone who wants to
participate. It also skews the system to weigh the interests of wealthy donors or