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Article:

5 Reasons to Care About America's Income Gap

How the Divide Between Rich & Poor Affects Us All

It's Bad for Demand

When poor households get an extra dollar -- or 10 or 20 -- they are almost guaranteed to spend that money. Rich households, however, are more likely to lock up the money in investments. 

Therefore, as more wealth is concentrated among that already-rich, relatively less money is poured into consumer spending, explained Robert Reich, former U.S. Labor Secretary and current professor of public policy at the University of California at Berkeley. 

"As the middle class's share of total income continues to drop, it cannot spend as much as before," Reich wrote in August. "Nor can most Americans borrow as they did before the crash of 2008 -- borrowing that temporarily masked their declining purchasing power."

 

  • Sarah Shemkus

    Sarah Shemkus is an award-winning freelance journalist, marketing enthusiast, accomplished baker, occasional globetrotter and total nerd (with a particular fondness for spreadsheets). Most recently, she reported on business and real estate … Read more...