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Income levels reflect the opportunities available to people to meet basic necessities and access resources for economic advancement and a good quality of life. Understanding the distribution of income provides a glimpse of relative opportunities for advancement in today's economy and, since social and economic problems are “bundled,” it facilitates the examination of the distribution and status of educational and health resources as well. Put simply, when absolute income levels are low, or relative incomes reflect high levels of inequality, a state of social as well as physical deprivation is likely to result, followed by capital flight, disinvestment, and lack of new investments to create jobs.
According to US Competitiveness 2001: Strength, Vulnerabilities and Long-Term Priorities, a 'Competitiveness Index' by Michael Porter and Debra van Opstal, the gap between households at the top and bottom of the income ladder has continued to widen and remained higher in the United States than in any other industrialized country. The report cites a number of factors as contributing to the growing income inequality. These include rapid technological change, the importance of higher education and skills, and global competitiveness for the production of goods — as less expensive sources of low-skilled workers are available worldwide.
In addition to the social costs of these inequities, the economic costs are also significant and are seen in the diversion of resources from wealth creation to poverty reduction. Unless inequities are reduced and people are placed on a path of relative self-sufficiency, a society cannot truly progress and prosper economically.
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