What Teenagers Need to Know About the Wealth Gap in America

Welcome to this post, What Teenagers Need to Know About the Wealth Gap in America!

The wealth gap in America is a topic that’s been getting a lot of attention lately. And for good reason – the gap between the rich and the poor is growing wider every year.

Before we dive into things, let’s backtrack a little into the definition of wealth. After all, it’s helpful to know the concept of wealth to better understand what wealth inequality is all about. 

Wealth is the ability to live comfortably without worrying about basics like food and shelter. An individual or a household’s net worth can be thought of as their wealth, which consists of assets such as money saved or invested, property, or possessions, minus debts owed on loans for mortgages, etc.

Investopedia defines wealth as something that measures the “value of all assets of worth owned by a person, community, company, or country.” This is determined by the total market value of those assets minus the liabilities.

So What Exactly is the Wealth Gap?

When we talk about the wealth gap, what we’re discussing is wealth inequality. It pertains to the disparity in the distribution of assets among individuals in a society and is often used as a factor in measuring economic inequality. Put simply, it’s the difference in wealth between the richest and poorest members of society. 

Wealth inequality is accompanied by income inequality, which concerns how unevenly income is distributed throughout a population.

The wealth gap can be measured by the Gini index, which is a statistical measure of how evenly distributed something is. It ranges from 0 to 1:

A 0 indicates perfect equality (meaning everyone has the same amount) while a 1 indicates perfect inequality (meaning one person has all the wealth, while the rest have none). A country with a 0.5 Gini index is implied to have moderate inequality (somewhere in the middle of the scale), with some people having more wealth than others but no one having excessive amounts.

Another useful metric is the median wealth of a population. The median is the middle value – so take note that half the population would have more wealth than the median while half would have less. This number can give us a snapshot of how well people are doing financially, and how evenly wealth is distributed within a country. 

Unfortunately, median wealth figures often show a large gap between the rich and the poor. In many developed countries, the top 20% of earners hold 80% or more of the total wealth, while the bottom 20% own very little.

CNBC’s April 2022 report about the Federal Reserve data on household wealth, shows that the top 1% in America own 32.3% of the nation’s wealth as of the end of 2021. 

What’s Causing the Wealth Gap to Grow?

Several factors have contributed and are still contributing to the wealth gap in America, and here are a few of them:

  1. The rising cost of living.

As part of the inflation, the cost of housing, healthcare, childcare, and education have all increased significantly over the past few decades, while wages have remained relatively stagnant. 

This causes more struggle for low- and middle-income families, as they are often forced to spend a larger percentage of their income just to keep up with the rising costs. As a result, these families have less money to save for retirement or invest in their children’s future. This unfortunate situation further widens the gap between the rich and the poor, as those who are already wealthy can pass down their wealth to future generations.

  1. Job insecurity.

When workers don’t have the stability of a full-time job that offers good benefits, they’re less likely to substantially provide for their essential needs, let alone accumulate wealth. They may have difficulty saving for retirement or making larger purchases, such as homes or cars when they’re barely making ends meet. This can create a cycle of poverty that is difficult to break out of, further exacerbating the wealth gap.

What Teenagers Need to Know About the Wealth Gap in America

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  1. The decline of unions.

Unions help to level the playing field by bargaining for better wages and working conditions for all employees, not just those at the top. But as union membership has declined, so has the power of workers to negotiate for a fair share of the profits they help to generate. The result is that the wealth gap continues to widen to the point that it can place a great strain on the economy.

  1. The Great Recession.

The Great Recession of 2008 was a global financial crisis that hit the United States particularly hard. With the housing market collapsing, many Americans lost their jobs and homes, financial institutions failed, and stock prices plunged. This greatly impacted the distribution of wealth in a way that those who were already wealthy saw their assets increase in value. While on the other hand, those who were struggling economically fell even further behind.

Until now, the effects of the recession can still be felt, with some people still struggling to find steady work to support their families. 

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  1. Tax cuts for the wealthy.

In 2017, the Trump administration passed a tax bill – dubbed the Tax Cuts and Jobs Act (TCJA) – that brought massive changes to the tax code by slashing taxes for corporations and the wealthiest Americans. The bill had claimed to help low- and middle-income earners, with Trump predicting that the corporate tax cut would cause business investments to boom and eventually translate to workers gaining a $4,000 annual raise.

This, however, did not become the case. Unsurprisingly, it turned out that wealthy corporations were the winners, not the workers. This bill is estimated to increase the wealth gap by $1.5 trillion over the next 10 years.

  1. Racism.

Racial wealth disparities have always been a big issue in America. For example, African-Americans have only about one-tenth of the wealth of white Americans. It’s no secret that there are centuries of discrimination against racial minorities in America, and it has prevented them from building up generational wealth. Even today, minorities are more likely to live in poverty than whites, have less access to education and job opportunities (with the last-to-hire,first-to-fire stigma still sticking after a long time), and be victims of racist policies and practices.

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What are the Effects of the Wealth Gap?

Many people might think it’s not a big deal since it’s a common situation occurring in many countries. But it’s more than just a number game. It can have a huge impact not only on a nation’s citizens but also on its economic and societal development as a whole.

An increase in the wealth gap will inevitably translate to an increase in economic inequality. 

The following are some of its negative effects:

  1. A domino effect that leads to more poverty.

The increasing wealth gap creates a class of people constantly struggling to make ends meet. As a result, they don’t have the means to spend money on things like housing, food, clothing, etc. Again, as a result, this can be a factor for companies and businesses not to do well. Naturally, if they’re not making a profit, the biggest possibility is closing down and leading to more job losses. 

And guess what? More job losses lead to more individuals struggling to stay afloat. It’s an ugly paradox, but the bottom line is the same – poverty and a declining economy.

What Teenagers Need to Know About the Wealth Gap in America

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  1. A high probability of an increase in crime rates.

When people are struggling to survive, they are more likely to turn to crime and violence to obtain the money they need. It’s not a good look for a country’s reputation, but it’s a reality that’s happening not just in America, but across the globe. Engagement in criminal activity further elevates social unrest and tensions.

  1. Decrease in social mobility.

It gets harder – nearly impossible – to climb the economic ladder. What’s clear is this: the rich become richer, while the poor become poorer. For those who are born into poverty, it’s difficult to have opportunities for a good education, find a nice and stable job, and even be able to afford proper housing.

What Teenagers Need to Know About the Wealth Gap in America

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  1. Increased level of stress and anxiety.

This outcome is more on a personal level, but should not be brushed off or set aside. The wealth gap can lead to poorer health outcomes, but this is seen more in the bottom percentage of the population who are in a constant struggle to keep up.

Particularly in teenagers, the wealth gap can take a toll on their psychological and psychosocial well-being. There are cases wherein children from poor families might experience feelings of inferiority and lack of self-esteem. These are all factors that can often lead to depression.

  1. Higher vulnerability in times of crisis.

During a recession or natural disaster, those who are a part of the bottom percentage of the population are the ones who suffer the most. They’re the first ones to lose their jobs, their homes, and their savings. Meanwhile, the wealthy can weather any storm and ride out tough times without much difficulty.

Does the COVID-19 Pandemic Have an Impact on the Wealth Gap?

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The answer is yes, it does. And it’s devastating. The COVID pandemic has worked in favor of the wealthy and the ultra-rich. 

In 2020, 44 million Americans lost their jobs and filed for unemployment insurance. Whilst the top five billionaires’ wealth increased by 26% between March and June. Latin-Americans and African-Americans were the ones hit the hardest by the nationwide layoffs, further worsening the case of the black wealth gap.

How Can the Wealth Gap Be Reduced?

There’s no immediate solution to reduce the widening wealth gap in America. It’s something that requires time, with both the people and the nation working together to make situations better. 

  1. Taxing the wealthy.

It’s way easier said than done, but this can be one of the major solutions to bridging the divide. A Bloomberg report in October 2021 showed that the top 1% of US earners hold more wealth than all of the middle class combined. The wealthiest households and corporations earn more revenue, therefore it only makes sense that they should pay more, not less, in taxes. 

  1. Investing in education.

Another way to reduce the wealth gap is to invest more in education. Then, granting more chances for the less privileged to go to school. This would help create more opportunities for all Americans, regardless of their economic background. 

What Teenagers Need to Know About the Wealth Gap in America

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  1. Reducing job insecurity and increasing the minimum wage. 

Having livable wages and stable hours will help people not just in paying bills or putting food on the table, but also in building their savings and creating a better future for themselves. This can also create a ripple effect, in a way that when people feel financially secure, they tend to spend money on goods and services, therefore boosting businesses and stimulating growth.

  1. Every individual, household, or corporation should pay their fair share of taxes.

This should be a given. We want the wealthy to pay their dues in taxes, but this goes out to everybody. No one should be totally free of the burden – everyone must shoulder what they reasonably owe. 

How Can Teenagers Become Part of the Solution?

What Teenagers Need to Know About the Wealth Gap in America

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Being young is never a reason to not have a contribution. Teens may not have a lot of assets, but they can still help in reducing the wealth gap. Even in their little ways, there’s something they can do. 

  • Be informed. Educate yourself on the issues associated with the wealth gap.
  • Learn about financial literacy. This way you’ll get a better grasp on the concepts of personal spending, investments, and credits or debits, helping you make better decisions with money.
  • Volunteer or get involved with organizations that work to reduce the wealth gap or those that provide services to low-income families.
  • Support businesses that pay proper taxes, and pay their workers a living wage.
  • Support businesses that are owned by minorities or women.


The wealth gap in the U.S is a pressing issue that everyone should be aware of, especially because it keeps increasing over the years. It’s important that teenagers, and every other demographic in general, know its causes, its effects, and the ways it can be reduced. Everyone should be well-informed and resolve to do what they can to make America a more equitable place. Are you ready to help out?

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