FOKUS AMERIKA Büro Washington Dr. Almut Wieland-Karimi 1023 15 th Street NW,# 801 Washington, DC 20005 USA Tel.:+1 202 408 5444 Fax:+1 202 408 5537 fesdc@fesdc.org www.fesdc.org Nr. 5/ 2006 Increasing Inequality in the United States Dean Baker 1 , Washington, DC  Inequality in the United States has increased hugely over the last quarter century, as there has been a shift from labor income to profits, and an upward redistribution from low wage earners to high wage earners. This upward redistribution has been largely driven by deliberate policy decisions.  Trade and immigration policies have been designed to subject workers at the middle and bottom of the wage distribution to international competition, while leaving the highest paid workers such as doctors, lawyers, accountants largely protected.  The Federal Reserve Board’s anti-inflation policies disproportionately affect the wages and employment prospects for less-educated workers. As the Fed raises the interest rate to slow the economy, the people that suffer most are those at the middle and the bottom of the wage distribution.  Government labor-management policy has become much more tilted towards management. For practical purposes, it is now legal to fire workers for organizing a union.  The soaring cost of the United States health care system disproportionately affects lower and middle-income workers. A Sad Status Quo The United States economy has grown at a reasonably healthy pace over the last quarter century, with GDP growth averaging 3.1 percent annually from 1980 to 2005. However, the benefits of this growth have gone overwhelmingly to the richest 10 percent of families, and among this group, disproportionately to the richest 1 percent. Most households have had very modest gains in income over this period, and the gains they did experience have been largely the result of the growth in two-earner households. The growth of inequality in the United States is widely acknowledged in policy debates. While there is little dispute about the general pattern of rising inequality, there is considerable debate about the cause. While some policy analysts argue that rising inequality in the United States is an outgrowth of globalization and technology, a strong argument can be made that the driving force has been a series of deliberate policy choices. This article describes some of the key policies that have fostered an upward