Jan
31
The Gap’s Only Getting Bigger….
January 31, 2015 | Leave a Comment
The gap between the rich and poor seems to be a continuous and ongoing void that is never filled. Even with legislation, rallying, and promises made by countless public candidates and officials alike, it seems like this void will never cease. Solutions you ask? I offer a few potential ones that I feel are very important to reducing this “Gap” effectively.
I could not agree more with the article by Ydstie and Silver. With Capitalism there must be a gap between the rich and the poor, no matter what. Otherwise there would be no motivation to put in more work and make more money. That’s a con of communism – a lack of motivation to excel in society. Anyway, like the article mentions, a gap is fine and there must be one, as long as it’s reasonable. The one that we have in the US, however, is by far a reasonable one, and it really shows. The poor are getting poorer and the rich richer. How can the top 400 richest people in the US have more money than the bottom 50% of the country? That’s just unfathomable to me. That one fact alone shows that we have a big problem. And I’m not even addressing the amount of people in the US who live in poverty and cannot feed themselves or their families.
The solution, it seems to me, has a few facets. The first needs to be education. One super effective way to get out of poverty is to get educated and would in turn, with a low percentage of unemployment hopefully, to get a better job. This would move one into a higher class and have more readily resources available, which would hopefully be passed down the generation line. (Given, it IS possible to get out of poverty without education, but this is extremely difficult to do so). Education, I believe, should be free and provided for by the government. There can be private institutions of course, but the government should pick up the tab on the public ones. This way, education would be much more accessible to a large amount of people, making the playing field a little more even. Plus the cost of education would be much less of a problem than it is now, as this deters a multitude of students from even considering some schools.
Another possible solution is to change the tax system in the US. I’m in the more of a “take from the rich and give to the poor” camp of thought. Taxing everyone equally would be fine in a communist government where most everyone make the same income. This is not plausible in a (especially our) capitalist system – it just doesn’t make sense. Those that make more have more money to give to taxes, while those on low income and minimum wage cannot be doling out 30% of their income when they also have a family to feed. Congress passing tax breaks to the upper class?! I don’t think so. An argument against this idea is that the people who earn more worked harder to get there. But it’s not a question of whoever works harder for their money makes more – that is not always the case. The guy working 3 minimum wage jobs could easily be outworking the head manager at a large retail store. The rich need to be taxed at a higher percent than the poor. The tax breaks should be going to the poor and middle classes, whom can set a stable foundation of spending for the country, rather than relying on the rich to create jobs for anyone and everyone.
Raising the minimum wage seems to be a very well-talked about solution for decreasing the Gap. I have some reservations about this. I know that it is difficult to live on minimum wage today and without an extra job(s) or another source of income, the quality of life may not be so high. $7.25 an hour in the US can’t get you too far, not even talking about education, affordable healthcare, or a retirement account. Especially with increasing inflation for the past few years, the dollar is stretching less and less. But if the government tries to raise the minimum wage too much, there could be potential issues with hiring. If the supply of available labor increases, but the demand to higher said workers decreases as a result of each additional worker becoming more expensive, there will be a very large amount of unemployment. Many small businesses would go under because they wouldn’t be able to afford the optimal amount of workers that they would need. Unemployment would lead to a higher crime rate, higher levels of incarceration, a wider Gap, and many other negative externalities. Therefore, I believe that the government, slowly but surely, should begin increasing the minimum wage at very VERY low levels. Maybe one dollar at first, then in 2-3 years, another dollar, and so on, until unemployment is as low as it can be with workers making a decent wage. A more risky route would be to tie the minimum wage to the inflation rate. The cost of goods over the years has rocketed over the past 60 years, with minimum wage increasing very little; but the two aren’t even close in comparison. Both of these possible solutions have their merits and cons, but I think this is the most difficult to measure and put into effect out of all of the solutions. The long run positives and negatives may not (and maybe cannot) be realized in the short run.
The OECD article shows us concrete data that there are modernized, capitalistic economies with stunningly low Gini coefficients. How? These countries pour tons of money into governmental and public programs. Fixing the cracks on the society level seems to be having a rather large effect on the income gap, no? Free healthcare, education, welfare, and other benefits seem to be working for some countries. Maybe you’re wondering if that’s socialism? You’d be right – most modernized countries (definitely including the US) are more democratically socialist if anything. Maybe countries that have adopted more socialist policies (Sweden, Denmark, and many other countries in Europe) are more successful at fixing their income distribution. I think we should be shifting to this school of thought. A healthy mix of capitalism and socialism, with both in moderation, could cure income inequality.
The Bloomberg article makes a very distinctive argument about the income gap. While real wealth decreased among the upper class during the Great Recession in 2008, wealth did not increase within the lower class during that time. It is NOT a zero- sum game. Do you know why? It’s all about access to resources, governmental policies in your favor, and education! The lower class had barely any of these and did not get to see any more of the riches, only higher inflation and prices during this time. Now that the economy has been recovering, the Gap continues to surge.
The Ted Talk addresses the inequality issue on a much larger scale – comparing different countries. Everyone is affected by inequality in a society, not only the poor class. The middle class have to bear a large burden then they can bear, with the upper class calling all the shots and saving their money at the same time. However, countries with more equal societies seem to be better off various ways. There is higher rates of trust, lower incarceration rates, and mental illness, among others, and with no correlation with the amount of income a country had. The US was, for the most part, at the bottom of every list with high amounts of inequality and high amounts of the negative aspect that was being compared. No good.
Income inequality is an issue that needs to be a much higher priority. The US (and the world) would be much more successful if income inequality was decreased, along with a higher standard of living and quality of life for many people who do not have it today.
By: Josh Solomowitz
