Methodology requirements
- Explain the process behind your selection of sources: the ones you picked, the ones you left out of your infographic and why. Remember: 4 (four) minimum sources.
- Explain why you think they are reliable or, if you think they are somewhat biased, explain what kind of bias they can have.
- Include a full list of the sources you have considered (data sources list), split between the ones you included in the infographic file and the ones you did NOT include in it.
- Include a web link to your infographic online (as from the instruction above, make sure it is visible from a computer other than yours.
Format
Methodology file: you are free to choose your font, spacing and other features of formatting. Your only constraint is a one-inch margin minimum throughout your document.
Data sources list: you are free to choose whichever bibliographic format you prefer (APA, MLA, etc.) as long as you include all the relevant information. That includes author, year, title, source, web link (when applicable). A simple list of links is NOT acceptable.
Income Inequality is a Problem
Why Income Inequality is a Problem
Income inequality is the magnitude of uneven distribution in a population. United States has experienced widening income inequality in the recent times if you consider that the number of Americans living in poverty increased by 15 % between 2000 and 2006 (Saez & Zucman, 2016). Furthermore, in 2012, the income of the 1% in the United States was 22.83% reflecting the widest income inequality gap since the economic depression of the 1920s (Chetty et al., 2014).
Figure 1 illustrates the increasing percentage earnings for the top 10% and the declining percentage earnings for the middle class and the poor. In 1970, the 50% at the bottom earned 19% of the total income, but in 2014, they made only 10 % of the total income reflecting a sharp decline of 9%.In contrast, the top 10% earned 47% of the total income earned in 2014 compared to 31% in 1970 depicting an increase of 16%.This situation seems to have accelerated as illustrated in Figure 2 since the share of US income that went to the top 10% had risen from 47% to 52% depicting the ugly picture of deteriorating income inequality in the United States. Therefore, the claim that income inequality is a problem in the United States is well substantiated and the sooner this problem is addressed, the better for the middle class and the low-income families. Possible reasons for the widening income disparity include technological advancements which have replaced relatively unskilled workers while rewarding highly skilled employees (Chetty et al., 2014). Also, globalization has enabled many corporations in the country to outsource labor from places like China where the cost of labor is lower than in the United States (Saez & Zucman, 2016). Also, the declining political power of the working class means that they do not have a say in the policy-making hence their interests are not taken into account in the law-making process. Finally, the declining value of the minimum wage means that the low-income earners cannot maintain the same standard of living they had in 2009 when the minimum wage was last reviewed (Tsui, Enderle & Jiang, 2017).
Figure 1: Comparison of Percentage of Share of Total Income Earned by Different Classes Between 1970 and 2014
Retrieved from: https://www2.deloitte.com/content/dam/insights/us/articles/3313_IBTN_income-inequality-infographic/figures/3313_infographic.png
The figure illustrates the ever-increasing disparity between the rich, the middle class and the poor. Whereas the poor earned 19% of the total income in 1970, this percentage had declined to 10% in 2014.In sharp contrast, the percentage share of the top 1% had increased by 16 % from 31% in 1970 to 47 % in 2014.
Figure 2: Share of Income that Went to the top 10% in the United States Between 1915 and 2015
The figure above illustrates that from the 1970’s the income disparity in the United States has become more pronounced reaching a peak in 2015 when the top 10% earned 52% of the total income in the United States.
Possible Opposition to the Problem Definition
While most people are likely to agree that income inequality is a problem worth solving, conservatives might not share this ideology and they may hold that income inequality is not a problem, and as such, it is not worth solving. The main argument that conservatives are likely to the front is that inequality is a natural part of free markets (Goda, Onaran, & Stockhammer, 2017). The United States is a meritocratic society meaning that people earn money according to the amount of hard work they put. For this reason, opponents to the notion that income inequality is a problem might argue that a free market is based on the idea that innovation and hard work should be rewarded and therefore, trying to fix income inequality will discourage innovation and entrepreneurial spirit (Helpman et al., 2017). Also, using the free market argument, opponents to the income inequality problem might hold that if people believe that their investments and income would not lead to a significant change in their incomes, their motivation to innovate and invest will decrease (Chetty et al., 2014). This argument is likely to win hearts since the entire US economy is built on innovation and hard work and therefore suggesting that fixing income inequality might remove this admirable aspect of the US economy will make many citizens and policymakers to have a second thought.
Why Taxpayer Money and Money should be Dedicated to Solve Income Inequality
Dedicating time and money to address income inequality is essential for several reasons. To start with, reducing income inequality will boost shared prosperity so that the rich, the middle class and the poor have equal access to quality amenities such as health and education opportunities. Shared prosperity will mean that people from all social classes can reap the benefits of globalization and technological advancement (Rudra & Tobin, 2017). As it stands, the poor and the middle class have seen the ugly face of globalization as companies source for cheap labor in emerging economies. Secondly, a reduction in income inequality is a vital ingredient to a healthy democracy. Notably, extreme inequality can trigger political turmoil where the majority poor rise against the minority rich thus tearing a country apart (Goda et al., 2017). The idea of populism champions the regular people and challenges them to take control over the governing of their country instead of leaving it in the power of few elites. Populism is likely to make a country ungovernable since the everyday people feel that they have been disenfranchised for eons and hence the need to take control of their economic, political and social destinies. Furthermore, reducing income disparity will promote faster economic growth since it leads to a reduction in government welfare spending hence more money can be used in developmental projects such as improving the state of roads and investing in education (Mueller, Ouimet & Simintzi, 2017). Besides, since wealthy people spend less of their income than poor people, putting more money in the hands of the poor and middle class will accelerate economic growth. Thus, it is worth committing time and resources to address income inequality since this will contribute to shared prosperity, healthier democracy and spur economic growth.
References
Chetty, R., Hendren, N., Kline, P., Saez, E., & Turner, N. (2014). Is the United States still a land of opportunity? Recent trends in intergenerational mobility. The American Economic Review, 104(5), 141-147.
Goda, T., Onaran, Ö., & Stockhammer, E. (2017). Income inequality and wealth concentration in the recent crisis. Development and Change, 48(1), 3-27.
Helpman, E., Itskhoki, O., Muendler, M. A., & Redding, S. J. (2017). Trade and inequality: From theory to estimation. The Review of Economic Studies, 84(1), 357-405.
Mueller, H. M., Ouimet, P. P., & Simintzi, E. (2017). Wage inequality and firm growth. American Economic Review, 107(5), 379-83.
Rudra, N., & Tobin, J. (2017). When Does Globalization Help the Poor?. Annual Review of Political Science, 20, 287-307.
Saez, E., & Zucman, G. (2016). Wealth inequality in the United States since 1913: Evidence from capitalized income tax data. The Quarterly Journal of Economics, 131(2), 519-578.
Tsui, A., Enderle, G., & Jiang, K. (2017). Income Inequality In The United States: Reflections On The Role of Corporations. Academy of Management Review, amr-2016.
Addressing Income Inequality
For decades now, the wealth gap among United States citizens has increasingly become high. This has contributed to various social and economic problems such as inadequate employment, poverty, crime, and health issues (Dabla-Norris et al., 2015). Because of the wide array of challenges attributed to Income Inequality there is need for the society to come up with some solutions to address this issue. Even though there are many ways through which the society can narrow down this wealth gap, the policies chosen need to follow a multifaceted approach in order to come up with a permanent solution. Below are some of the policy alternatives that can be used to address the issue.
Providing affordable, and quality education to the citizens
According to Breen & Chung (2015), education is one of the major factors that accounts for income inequality among the people. The people who are well educated are more likely to earn better incomes than the people who are not educated. This is due to the fact that educated people have some skills which they can use to acquire full time employment with good salaries. Because of this reason education is arguably one of the best tools that can be used to eradicate income inequality in United States.
Lack of education among some citizen in the United States is closely attributed to poverty. Statistics show that more than 1 out of every 5 children are living in poverty (Childfund, 2013). This means that a similar number of children don’t get good education because their parents can afford. Even if they access education it will likely be the basic primary and secondary education and they will never have the opportunity to get post-secondary education. Since most of the good jobs currently demand at least one to have post-secondary education it is important that we invest in providing access to affordable and quality education and encourage young people to go school.
To provide affordable, and quality education the government should:
· Build enough schools in all parts of the country that can accommodate everyone who needs education.
· Ensure that the schools have enough resources needed to provide quality education. This include qualified teachers and learning materials
· Subsidize the cost of education to ensure that the citizens can afford
· Provide scholarships to low-income students to help them access higher education in-order to acquire the skills needed to secure jobs in the competitive market.
Issues facing education in United States
One of the greatest issue currently facing education in the us is the criticism of public schools. This has consequently led to decrease of funding of the schools. As these are the schools which most of the low-class people can afford, most of the students end up not getting quality education because the schools are not well funded and lack resources needed to provide good education. Other people assume that public schools have incompetent teachers. Due to this reason graduates from these schools face a hard time getting employment since most employers assume they are a product of poor training programs (Breen & Chung, 2015). Maintaining these perceptions will continue hurting the education and young generation who have potential to learn hence maintaining the income inequality.
Taxing the rich
The tax system is a very essential tool in wealth redistribution. A country which has a big percentage of its wealth belonging to the hands of only a few people is likely to face challenges in growing its economy. Over the years income taxes have been seen as another tool of curbing income inequality. Even though increasing taxes for higher income earners can affect the economic growth of a country it can significantly lead to declines in the income inequality. However, the increase in the top-bracket tax rate need to be accompanied with some sensible tax polies so that it does aggravate problems in the tax system (Kumhof et al., 2015).
How to ensure that the rich are fairly taxed
Even though most of the times rich people most of the times find legal and illegals ways to avoid paying taxes, a progressive tax system is likely to reduce the wealth gap between the rich and the poor. To ensure that families don’t remain wealthy for generations, a country should impose high estate taxes so that rich people don’t pass their wealth to their children. Another way to ensure that the inheritances are fairly taxed is make sure that rich people don’t own their assets until they die.
Increasing the minimum wage
Raising the federal minimum wage can significantly help reduce the income inequality. On the other end it could help the value of the minimum wage which has only risen from $5.15 to $7 since 2007 (Brainerd,2018).
But how can how can it reduce income inequality?
Currently, the gap between low-wage and the middle-wage workers wages is quite big. In this case if the minimum wage is raised it will make some progress in reducing the gap. If the current minimum wage is raised it can increase the pay of more than 1.6 million and many more who currently earn less than the minimum wage. Most of the low-income families end up attending low income schools because they cannot afford to pay the private ones. This puts students from such families at first risk because the low-income schools don’t have enough funding to provide the facilities needed to give quality education. Evidently, the minimum wage is an important matter that need to be addressed not only to appease income inequality but also to improve the people standards of living (Sabia & Burkhauser, 2010).
The people who oppose increase of the minimum wage argue that increasing it will place a burden to employers especially the ones with small companies which will in return lead to slower growth rates of their business due to low returns. They add to say that if the companies make small returns they are likely to retrench their employees leading to unemployment. On the other hand, the ones who advocate for its increase say that the current minimum wage doesn’t match the rate of inflation. Opinions from both sides have some economical implications but the later carries the day since studies have shown that increase in minimum wage have little impact on unemployment(Schmitt,2013).
References
Brainerd, J. (2018, February 1). STATE MINIMUM WAGES | 2018 MINIMUM WAGE BY STATE. Retrieved February 14, 2018, from http://www.ncsl.org/research/labor-and-employment/state-minimum-wage-chart.aspx
Breen, R., & Chung, I. (2015). Income Inequality and Education. Sociological Science, 2.
Childfund (2013, April 11). Statistics on Poverty and Education in the United States. Retrieved February 14, 2018, from https://www.childfund.org/Content/NewsDetail/2147489206/
Dabla-Norris, M. E., Kochhar, M. K., Suphaphiphat, M. N., Ricka, M. F., & Tsounta, E. (2015). Causes and consequences of income inequality: A global perspective. International Monetary Fund.
Kumhof, M., Rancière, R., & Winant, P. (2015). Inequality, leverage, and crises. American Economic Review, 105(3), 1217-45.
Meer, J., & West, J. (2015). Effects of the minimum wage on employment dynamics. Journal of Human Resources.
Sabia, J. J., & Burkhauser, R. V. (2010). Minimum wages and poverty: will a $9.50 Federal minimum wage really help the working poor?. Southern Economic Journal, 76(3), 592-623.
Schmitt, J. (2013). Why does the minimum wage have no discernible effect on employment?. Center for Economic and Policy Research, 22, 1-28.