Discussing American Income Inequality

This chapter of the textbook discusses many changes in the American Economy, and speaks to the distribution of income. The authors use the markedly high differences in the quintile distribution of income, the P90/P10 ratio and, the Gini Coefficient to compare the American distribution to other wealthy countries. All three categories point to poor distribution, which has severely increased over the past few decades. This has sparked a pervading discourse that discusses the magnitude of the issue across the internet, magazines and news sources. But how serious is this issue and what can be done to combat it?

From 1970 to 2012 the top 20% of household’s share of national income increased by 10.1% while the second wealthiest quintile barely moved. Therefore, that 10.1% increase in the wealthiest quintile burdens the lowest three. The P90/P10 ratio shows that those in the top 90% earn six times as much as those in the lowest tenth percentile. Since 1979 this ratio has increased more dramatically than in other similar countries such as the United Kingdom, Germany, and Canada. Finally, the Gini Coefficient shows once again that in the United States inequality has increased more than in these other wealthy countries. The United States’ coefficient has increased to .394 while that of many other countries has decreased. These number all point to this issue becoming worse and worse, and more rapidly than other wealthy countries. However, these numbers do not expressly point to a definitive change in the quality of life of these groups.

Some criticize how severe this issue truly is. Perhaps the income distribution appears worse from these statistics than it truly is. These three mentioned statistics measure income, and not wealth, which could more accurately measure the change in quality of life between the distribution. Other critics say that the everyone is better off, the statistics just state the increase has been more modest for the lower classes. Additionally, the capitalist cycle fluctuates over time which could lead to a natural reduction in the future.

If the issue is as alarming as it is often portrayed, then the government should use policy changes to shorten the income gap. Potentially, the government could further invest in education, allowing more fluidity between classes and push more people to higher incomes. In addition, the government could continue to increase the minimum wage. Moreover, another option would be to make taxes more progressive, which could generate revenue to be used for greater redistribution of wealth. These could potentially work to shorten the gap and generate revenue back in the disappearing middle classes.

6 Responses to "Discussing American Income Inequality"

Grant Golden says:

September 24, 2017 at 9:37 pm

I think that this is a serious problem in the United States today. The income equality is no doubt holding back some people in the United States and limiting opportunity. But like you hinted on at the end of the first paragraph, what can we do about it? This is the dilemma with this problem. No matter what way people look at it, there are not many reasonable solutions. There are many things that look good on paper but economically would not be able to be done. Eventually, this talk just comes back to raising taxes which is something that as we all know many people in our country do not want. Our political community is so divided today that this is a problem that will not be solved anytime soon. It is something that our two political parties would have to compromise on which seems to be virtually impossible in today society. Until we have that compromise, there will be no change in this issue.
Spencer Yacos says:

September 26, 2017 at 1:50 pm

The real sticking point of your argument comes with your last point – the idea that if the income gap is too severe, we should do something about it. Barack Obama, for the 8 years he was in office, frequently decried the state of income inequality and tried his best to work against it. What were the results of his crusade? Inequality got worse over his term, almost exponentially so. While some may point to the fact that he was competing against a Republican Congress for most of his term, that just furthers my point. This 1% and .1% politically donate to candidates that serve their interests, most of which happen to be Republican. If advocates really want to see some kind of change in income inequality in the US, it must first start with campaign finance reform. Otherwise, the interests of the many will always be outweighed by the interests of the few, because those few can write a larger check with the candidates name on it.

https://www.crowdpac.com/blog/the-1-percent-of-the-1-percent
http://money.cnn.com/2016/01/12/news/economy/obama-state-of-the-union/index.html
https://inequality.org/facts/income-inequality/
Lauren Rothenberg says:

September 26, 2017 at 5:14 pm

Inequality is a plaguing presence in the United States today. As you mentioned, and as discussed in class, the root of this issue stems directly from the implications of a liberal society. The structure of American Democracy and the overall political culture of the U.S emphasizes a “shared” value of freedom. However, equality is also one of the most valued “rights” in our country. These two seemingly fluid values come head to head because our freedom often impedes the ability to achieve and maintain equality. This imbalance between freedom and equality is frequently evidenced, especially given the political climate today. The freedom granted by our nation permits, to a certain extent, the actions displayed by protesters recently in Charlottesville. However, having said this, these protests inherently diminish the supposed equality our nation supports by discriminating against specific groups of people. Further inequalities are apparent in education status, income status, etc. as you mentioned. Regardless of whether these inequalities are indicative of inequalities pertaining to equal opportunities vs. equal conditions, it is obvious that our nation is in desperate need of some sort of class-based revolution. In accordance with what you said, the appropriate and adequate approach to this revolution remains rather ambiguous.
Hannah Dunn says:

September 26, 2017 at 9:12 pm

The issue of income inequality is a timely one. We are coming off a massive recession and the middle class has not fully gained back all that it lost. In addition, the middle class today is earning less than their parents did. Most American workers are not being adequately compensated for their work, producing the exact issue you have delved into above. We are rewarding those who already have accumulated wealth and allowing it to steadily increase as we force the middle class and low-income folks to work the same amount they always have for lower pay.

I agree with your statement that the solution to income inequality is not clear. However, I think education is a promising place to start. If the issue of property taxes feeding into public school budgets is addressed and charter schools are regulated so that all children are provided with an equal opportunity to learn, we may start a bottom-up decrease of the achievement gap, and eventually of income inequality.

Sources:
Kleinbard, Edward D. We Are Better than This: How Government Should Spend Our Money. Oxford University Press, 2016.
https://www.washingtonpost.com/news/answer-sheet/wp/2014/05/20/a-dozen-problems-with-charter-schools/?utm_term=.e303a206e20f
Emily Dunbar says:

September 26, 2017 at 10:51 pm

Income inequality is a major issue that the US faces, however the idea that the government should intervene and increase the minimum wage to decrease the gap between the middle and upper class is a bad idea. According to “Raising Minimum Wage Is Not The Answer” on Forbes, in theory this could work, however raising the minimum wage will result in employers laying off more workers because they have to pay their workers more but do not make any more in revenue. To account for this, they must pay less people more money, getting rid of a lot of jobs, this results in a higher percentage of unemployment which just does nothing to fix the issue of income inequality, if anything it makes it worse.

However I do agree that if we focus on education, this will result in more higher paying jobs people have. If more people are well educated, they will have better opportunities and will be able to hold higher paying jobs. The more education and the higher percentage of well educated people in the US, will definitely help decrease the gap between the upper and middle class. For me, I think education is the best option and path to take in order to help alleviate the income inequality.

https://www.forbes.com/sites/johntharvey/2014/07/06/raising-minimum-wage-not-the-answer/#6e95d2d15b5c
Daniel Bonaventura says:

September 27, 2017 at 12:20 am

America, by design, has and will always have notable income equality. As we discussed in class, the Framers created a standard in which Americans are given the right of equality of opportunity but not equality of condition. This means that people will always in theory have the chance to better their status but this must be achieved with little help or adjustment from the government. Because this is an ideal that most Americans strongly value, and one that has progressed us as a country, it is a standard that will most likely be here to stay.

However, there should be limitations to this standard. The Huffington Post Article “Can We Fix Income Inequality” describes that if this income inequality was to become to extreme, there would be a large amount of output but at the cost of most lives being dominated by financial struggle, and the disappearance of the incentive to contribute to society. This poses the question, Is this where our country is headed? And what can we do to combat this issue? One one hand it seems logical for the federal government to intervene, but on the other hand for the federal government to become even stronger challenges the standard set by the framers. Although a tough question to tackle I believe you provide a strong option to invest in education. To invest in human caption, as appose to just redistributing wealth, not only helps balancing income, but also raises it on a national scale.

http://www.huffingtonpost.com/fixcapitalism/can-we-fix-income-inequal_b_8129972.html

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