Jan
29
Class 1 – Income Inequality – Sheena Chin
January 29, 2015 | Leave a Comment
Prior to reading the three articles and watching the TedTalk video, I am ashamed to say that I have never really regarded income equality as such a big problem compared to other societal problems like gentrification, immigration, and environmental protection. Given, I had associated the phrase “income inequality” with the recent Occupy Wall Street Protests that occurred a few years ago. I recognized the movement as awareness of an opinion that the top earning 1% of Americans lavished in wealth, while the remaining 99%, well, did not. In these three readings and video, I was able to gain some insight into the pros and cons of how income equality affects citizens of a country.
In the first article, what I had gathered right away is the article’s explanation of why high income inequality is typically a bad thing before it proceeded shamed countries with high income inequality (Chile, Mexico, Turkey). Intuitively, the article says that income inequality is simply “morally undesirable” as it can lead to conflict and other health stresses. I wish the article had delved deeper into the leading issues of the negatives of income inequality because I was left really confused after reading the rest of the article. However, I did appreciate how the article clarified the statistical definition of poverty in the second part of the article, in which previously I had just lump-summed poverty as just the “lower end” of the income spectrum.
In the second article from Bloomberg QuickTake, I thought it was really interesting to learn about The Great Gatsby Curve, which surprisingly isn’t as much as a curve but more of a straight line showing positive correlation between income inequality and generational mobility. Because the United States have a relatively large rich-poor income gap, the curve predicted that these days, the wealth of children will be more dependent on their parents. Unlike the previous article which had only listed the negatives of income inequality, it was refreshing to read about what the critics of income inequality had to say. They claim that inequality is the driving “incentive for people to create wealth, innovate, and take risks.” I’m not an economist, but I guess this claim is valid for those at the cream of the crop and who are able to take monetary risks, but I wonder how this rings true for those at the opposite end?
The TedTalk video was very informative and helped me understand more of the content because of the provided visual aids and the British accent. At first I was very confused to learn how there is no correlation between the gross national income per head and the well-being of society. I thought it was very intuitive – wealthier countries could afford higher standards of living. However, Wilkinson points out that this is the case for poorer countries, not developed ones. In fact, it is “where we are in relation to each other” that matters very much. I like how he clarified this concept differentiation to teach the audience that it isn’t so much as how the gross national income determines the well-being of a country, but more so how income inequality is detrimental to health, human capital, and social relations. I feel like all of my confusion were answered here.
In the article by Ydstie and Silver, I agree Tyler Cowen’s remark of differentiation between “good” and “bad” inequality where he states that, “if you have inequality because your poorer people don’t have enough economic opportunity, I would say that is a big problem.” I think that a more effective solution to close the gap between the wealthy and poor of society is not just to burden the wealthy with taxes, but educate and create more opportunities to lift the poor and the middle class out of stagnation. I agree that education and health care are not equally provided for along the income spectrum, and that those two opportunities are the key components to decrease America’s high income inequality.
