How did the uneven distribution of income in America contribute to the Great Depression?

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pholland14 eNotes educator| Certified Educator

For most of the United States, the Roaring Twenties were not a prosperous time.  Factories still had layoffs.  Union membership dropped as unions were considered "leftist" and fell out of favor with the public.  While some factories were considered good places to work and paid good wages, there was still a great deal of income insecurity among workers due to the fear of sudden layoffs.  Farmers were hurt by the abrupt end of World War I and the subsequent fall in farm prices.  In their attempt to make up part of their earnings, they produced more. However, this only depressed prices further by flooding the market.  Most of the United States still had economies which depended on farmers.  When these farmers began to lose their incomes and, eventually, their farms due to heavy borrowing during the boom period, the local economies suffered as well.  

The consumer economy during the 1920s was heavily influenced by buying on credit.  Factories produced more than the public could buy as people were laid off and had their wages cut.  The layoffs contributed to people losing their purchasing power.  Over half of Americans during the period lived below the poverty line.  While the 1920s were a good decade for the top percentage of wage earners, many people still lived paycheck to paycheck.