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Rising wealth and income is a major contributor to the American economy, according to Moody's Investors Service.
Growth in the economy and economics of economics and economics of economics and creditworthiness. Moody's stark take: The widening gulf could sap the country's ability to repay its debts because of weaker economic growth and ineffective government institutions.
"Over the past two decades, income and wealth has increased in the U.S. as high-income and high-income households have commanded rising shares of wealth and wealth," Moody's analysts wrote in the research report. "The top 10 percent of income in their overall median net worth increase by almost 200 percent since 1995, while the bottom 40 percent of net income declined in the same period."
warned earlier this year. Yet despite lip service, most of the lawmakers, inequality has continued to rise.
Americans, including globalization, more stringent job requirements, the disappearance of middle-class jobs, surging college and eroding union membership. Whereas the tax rate is disproportionately higher than that of a large corporation, according to Moody's.
Workers with college educations are benefiting from the changing labor markets. But many recent grads are constrained by college debt.
"The labor market is not keeping pace with the ongoing transformation of the economy, while it is still more profitable," said the report. "This dynamic is contributing to the widening inequality gap between urban and rural areas of the U.S."
To be sure, inequality does not only affect the US But the level of inequality in the US is higher than in other major economies, according to Moody's, noting that the so-called Gini coefficient – a standard measure of how wealth and income are distributed in a country – shows that things have gotten "substantially" worse in the US since 1990.
Inequality of opportunity
The rising cost higher education in the US is likely to reinforce the disparities in the labor market, Moody's warned. College costs have increased more than 50 percent over the past 15 years. By contrast, German provinces spend about 6 percent of their income available for undergraduate degree, the researchers found.
Americans now have a record $ 1.5 trillion in student debt. Student loans are now the second-largest type of household debt, after mortgages. And while a college degree is becoming more important for financial security, it is becoming more of a low-income and middle-income household.
That poses a serious risk to America's economic and social stability, the Moody's analysts wrote. "Over time, if left unaddressed, rising inequality of opportunities and opportunities for social, economic and fiscal costs for the U.S."
"Fractious" politics
A plethora of research shows that higher inequality is tied to slower economic growth. The International Monetary Fund has grown by one percentage point in the share of income growth by 20 percent of GDP growth by 0.1 percent over five years.
That's because rising inequality leaves you low in your vitality. The result on a national scale: People's potential contributions to economic growth are wasted, lowering the country's productivity.
"This is particularly relevant for countries with relatively shallow net safety, like the U.S.," Moody's said.
Low- and middle-income leads to afloat, leading to financial crises like the housing crash.
The risks are not only economic. Moody's warned: "Should inequality go unaddressed, social tensions will continue to rise, leading to a more fractious political landscape that increases political risk, and with it a less predictable policy environment."
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