Income Inequality Essay

1757 words - 8 pages

The income of the top 1% has risen almost 300% since 1979, much higher than any other fifth percentile. Unbeknownst to most Americans, the rate of this separation is now growing exponentially. Some United States counties now boast GINI index close to those of countries in Africa and South America. This is all happening while the government has been decreasing the effective tax rate of the top 400 earners by almost 10% starting in 1992 and continuing over the next 15 years. American mindset is now a “winner-take-all” and each person is trying to grab the biggest piece of the pie. Some believe that raising the minimum wage will help by adding additional income to the lower percentiles but ...view middle of the document...

This income inequality isn’t just limited to the state of New York. Income inequality isn’t just a 21st Century concept either, in fact back in the 1980’s there were early indicators showing patterns of economic inequality not just household income.9 Some of these indicators were the poverty rate and workers earnings.10 If you take a look at a larger section of American economic history you see how bad the difference has gotten and how much it has grown. From 1979 until 2007 the top 1% had their average after-tax income increase almost 300%, compared to the 95% of the top fifth, the 25% of the middle fifth, and the 16% of the lower fifth.11 Not only that but from 2006-2007 the top 1% made approximately $71 billion combined.12 Yet those at the top continue to see lower tax rates even as their incomes grow. (See Table 1.)
III. How should the Government React
There are a few ways that the government can affect the American inequality crises: taxing the rich and/or raising minimum wage. Those who believe that the rich actually boost the economy think that raising taxes will only make things harder. Those who are nervous about having such an inequality income gap aren’t entirely sure how to fix the issue.13 Certain people understand or at least agree that they could be taxed a little more a still live comfortably.14 However, they also argue that if they are taxed too much they lose an incentive to do more work thus making their services fewer.15
Raising the minimum wage also might have negative consequences. With a higher minimum wage it is tougher for employers to differentiate between applicants, since both would be willing to work for the higher wage it might eliminate competition for jobs.16 If it is economic equality we want it is hard to achieve it without government help. The drastic numbers put up by the United States aren’t the only ones and if you take a look at the ratio of workers salary to CEO salary in different countries you can see the different outcomes.17 In the United States the CEO to worker salary ratio was 319 to 1 in 2008, in japan it was only 11 to 1, Germany had a ratio of 12 to 1, and Mexico’s ratio was 47 to 1 showing a variety of different outcomes of market economies.18
A final method the government could use would be to invest in education.19 Helping young Americans finish high school and even go on to some postsecondary education, which would give them the necessary skills to compete for jobs.20 However, there is no guarantee that these jobs will be waiting for them when they finish their schooling.21 Students often choose their education of choice before they know what it should be because it is impossible to predict what jobs we will need in the future.22
IV. History of Inequality
Preceding the 19Th Century much of the United States was rural farmland making it easy for many Americans to stay at a relatively even living without signs of extreme wealth or poverty.23 Once the industrial age...

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