InCome Inequality

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inequality gap negatively effects economic growth. Income for the top has grown steadily, but income for the bottom 10 % has grown much slower. Between 1999 and 2010 the U.S. economy lost 6-7% of growth because of income inequality. At this rate income inequality is expected to reduce economic output by 8.5% in the next 25 years (Rooney). This will in turn cause the economy to slow down and grow much less. Income inequality also negatively effects educational opportunities. Higher income students can pay full price so colleges seek these people out and fulfill their desires. However, schools want a socioeconomically diverse group of students. So they lower tuition, but this ultimately benefits the higher income students rather than the lower income students because a lower tuition also means a lower financial aid (Hill). Because there are fewer students going to higher education there are also fewer middle-class educated people at the top. This trend will not change without any help and will cycle on making the income inequality gap get bigger and bigger.

Another negative effect income inequality can have is in the health and happiness of citizens. Citizens in an unequal society are likely to get sick, become obese, unhappy, unsafe or end up in jail. Unequal societies are also more likely to have crime, 50 studies have shown that higher differences in income tend to have a more violent society. On the opposite end, US states with more equal income distribution tend to have less violence and be a safer community (Gordon). These things don’t only effect the citizens, but also the economy as a whole. Crime is bad for the economy and everyone in it. Another researcher says that people in unequal communities are not likely to live past the age of 75 while those in equal societies may get another five to ten more years (Sanger-Katz, Margot). This shows that if we were to live in a more equal society we might live a longer and safer life. After all of these statistics some people still say that income inequality is not an issue. Their argument is that America’s poverty line is at about $23,000 and with this much money someone could afford nice housing and food in certain African and South American countries. They believe that there should instead be lower barrier entries and that regulations should be fixed. To this I say we do not live in Africa or South America, so it does not matter what we can buy if we lived there. If we lived there we would probably make much less money. We live in the United States which is a first world country. People do not expect to be malnourished in the United States, because our government is able to fix it, it is just a matter of if they are willing to. Also, if there were to be lower barrier entries then I think the economy would ultimately suffer. I think there would probably be a lot more shady business and monopolies.

One way to help income inequality, is to control the top percent and grow the middle class. Joseph Stilglitz says to grow the top percent, Wall Street managers would need to be required to disclose their holdings, returns and fees. He also says that short term reading needs to be reduced and to instead encourage long term investment by adding a transaction tax. Other ways to control the top percent are by making companies provide information about CEOs pay compared to its workers, raising taxes on capital gains and dividends, and taxing global income on corporations (Luhby). With these rules and regulations the top percent would stay controlled as the middle class got a chance to grow. To grow the middle class Stilglitz suggests investing in infrastructure, strengthening bargaining rights of workers and raising minimum wage. He also says we need to invest in young children in early education require paid sick and family leave (Luhby). These things would help a middle class family live a more stable life and to grow further.

Bernie Sanders also gives ideas to shrink the gap, one of which is to make college free. Which I’ll admit, is a very radical idea and very unlikely; but the simple fact is that when people do not go to college, they lose job opportunities and when they do go to college, they are often weighed down by a lot student loans. He proposes another way to fix this, which is by lowering interest rates on federal student loans and stopping the government from profiting off of student debt (Egan). This would help more people to be able to go to college and succeed in life. By going to college they would be able to have better job opportunities and would help to shrink the income gap. Sanders also suggests taxing Wall Street on trades of stock, bonds, options, and futures. As Stilglitz did, he also suggests investing one trillion dollars into infrastructure over a time span of five years. Other things Sanders suggested were a 15 dollar minimum wage, a progressive tax system based on ability to pay, and less globalization (Egan). Although some of these solution are very exaggerated it does show the point that something needs to be done. These may not be the best options or the most realistic options, but they are options none the less. Some options are better than none. Although I don’t necessarily agree with some of these solutions I think it’s necessary to look at all possible solutions to find the best one.

Senator Jeff Bingaman proposes an organization called A Corps where the government would offer subsides and tax cuts to corporations that enter. To quality for entry they must contribute three percent of their payroll to pensions and two percent to training and education. There would also be a cap on salaries of highest paid employees so they could not make more than 50 times the lowest paid full time worker. Bingaman also suggests a small tax on short term trading, this would get a lot of money that could be used fixing the inequality issue (Brittain). This is a good option because the corporations would be educating and taking their workers to be the best they can be. Also, this would fix the problem that CEOs get paid 300 times as much as their employees instead only 50 times as much.

Lastly Bill Gates suggests a progressive consumption tax with an added estate tax to keep rich from letting their wealth grow over generation (Matthews). In a progressive consumption tax families would report their taxable income to the IRS, and their annual savings. They would subtract their savings from their income and then a deduction based on the size on your family. This amount would then be their taxable consumption (Frank). An estate tax would then be added to prevent growth of wealth over generations. Estate tax is a tax on the property of deceased ones which is passed on to heirs (Huang). This is a way in which the income inequality gap can shrink without discouraging entrepreneurs to go out and make new things.