Jan
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Blog Post #1 – Income Inequality – Tiffany Fan
January 29, 2015 | Leave a Comment
Income inequality has been an ongoing issue for decades. One of the solutions that I’ve always thought of was making education more available to the poor, which President Obama is attempting to do by providing free education in Community Colleges. By providing those who want to achieve a higher education without the burden of the tuition, it allows for those people to obtain a degree and earn a higher income. Thus, it would provide the poor with income that they weren’t able to achieve previously, which would break them out of the poor category. I have never thought of income inequality as more than an economic issue, but from the TedTalk, it provided me with other corresponding issues that it may cause on a social level that I would have never thought about.
For the TedTalk, I was surprised at the fact that there is no strict correlation between life expectancy and gross national income. Japan is known for having a longer life expectancy as compared to other countries, but I figured that would have been because a higher gross national income because it would give them a higher standard of living. In addition, it would allow for them to have the wealth to spend on health care and more beneficial foods, which would lead to longer life period. However, this was not the case. However, there is a correlation between income inequality and the index of health and social problems, which demonstrates a lower index when income inequality is high. It’s difficult to measure the index of health and social problems and provide a measure for it and some would argue that suicide rates should be included in Wilkinson’s argument. In addition, the population of each country significantly differs from that of the United States and thus, comparing the United States to other countries would be difficult.
As for one of the solutions to reducing income inequality pointed out in Deprez’s article, it was to increase minimum wage. This solution is very controversial, but I view it as an unproductive way of dealing with the issue. Raising minimum wage would allow for employees to remain at the company for a longer period of time and poverty to decrease, but it also causes for firms to pay more to employees. This causes the firm to fire employees as they risk losing wealth, which then causes a higher unemployment rate. Therefore, for some employees, it benefits; however, for other employees, they are left without a job. In another case, raising minimum wage may cause for products produced by the firm to increase, which would offset the minimum wage when purchasing goods. For example, Australia currently has the highest minimum wage in the world at about close to $15.00, but has a 0.31 Gini coefficient and 14.6 percent of people living with less than 50 percent of median equalized household income. As compared to the United States with a minimum wage of $7.25, which differs from Australia by only 0.07 higher for the Gini coefficient and 2.7 percent for poverty (OECD). Thus, with minimum wage almost double of the United States, there weren’t significant changes in the measuring of income inequality and poverty.
In Ydstie’s and Silver’s article, Milanovic suggests that a certain amount of inequality would be necessary for capitalism to succeed. I’m not sure that I agree with his statement “it provides incentives for harder work, study, investment, and…” because the poor does not necessarily work less hard than the rich. One of the issues that the poor face is the lack of education that they weren’t able to attain in the past as the article mentions previously, which I believe is one of the key aspects to this income gap. Freeman also states “the capitalists are making money; everybody’s got to be a bit of capitalist…” I think that the poor have just as much capitalist inside of them as does the rich, but still are making less than the rich. So what are the aspects of inequality that would be beneficial to income inequality? And how would the idea of having “a bit of capitalist” lessen the income gap?
As for solutions for income inequality, it could include a long list of things that need to be done that are probably constantly going to be changing in the long run. In addition, I would agree with Milanovic who recommends greater estate taxes and Cowen who suggests making education, health care, and housing more achievable. It’s more of a combination of things that must be done, which would take a great deal of time more than strictly one solution to the issue.
