Category: Income Inequality

Although the United States belongs to the group of the most developed countries in the world, poverty is one of the main problems of the state. Forty million Americans live below the poverty line, struggle to pay the rent, or find affordable housing (DeParle, 2016). The primary cause of poverty in the United States is socio-economic inequality since such ethnic minorities as African Americans, Hispanics, and Native Americans are among the poorest social groups in the United States.

Education, healthcare, and housing are areas that need to be addressed first to help the poor. Education plays an important role in alleviating poverty, but its cost is a huge obstacle for poor families. A large proportion of young people cannot take advantage of the benefits of a higher education, which leads to the employment of the economically active population (Smelser & Reed, 2012). Since the United States has not deployed community-based policies such as universal preschool or free higher education to address huge social inequalities, the lack of investment in education is dangerous. University loans are offered to young people to pursue higher education, but student debt has been growing in recent years (Leonhardt, 2016). Therefore, the United States faces a double challenge: highly unequal access to higher education and a massive buildup of student debt.

Despite advanced medicine, the American health care system remains one of the main problems in the United States as well. The reason for this is the unaffordable prices that taxpayers and the state have to spend on medical services. Most of the medical facilities in the country are private, so healthcare is received by those who can pay for it (DeParle, 2016). An American must have a constant income to get insurance; however, not all employers are ready to offer their employees an insurance plan.

The government strategy expands the gap between rich and poor citizens. Rich Americans are becoming richer due to the worsening of working conditions for employees. Simultaneously with the curtailment of workers rights, the influence of big business on government decision-making is growing. The American dream is rapidly becoming the American illusion since people have the lowest opportunities to raise their social status in comparison with any other rich country. Neither the countrys wealth, nor its power, nor its technology is being used to help the forty million people living in poverty.

References

DeParle, J. (2016). Kicked out in America! The New York Review of Books. Web.

Leonhardt, D. (2016). Opinion | The American dream, quantified at last. The New York Times. Web.

Smelser, N. J., & Reed, J. S. (2012). Usable social science. Berkeley: University of California Press, 294-314.

Key Tenets of Income Inequality

The PBS interview on income inequality emphasizes the role of social class in the widening gap between the rich and the poor. According to PBS, one of the main reasons behind the gap is inequality in distributing financial resources (Income Inequality 2007). In the past, the government set the rules that all social classes operate under, but only the upper class can benefit from those rules (Income Inequality 2007). Wealthy people tend to enrich themselves and others in their income bracket by exploiting the government and scratching each others backs (Income Inequality 2007). Thus, the income gap is supported by the government and businesses that encourage further changes in tax law.

The video also highlights that ordinary workers are losing power and do not benefit from their jobs. Beth Shulman notes that many workers cannot get paid sick days or family leaves (Income Inequality 2007). She provides an example of a family in which the older brother had to miss school to look after his sick sibling because the parents could not get time off (Income Inequality 2007). Because of the parents being powerless in their workplace, the child missed out on his education while the parents were forced to work in order not to lose income. Overall, the video shows that working-class people have no power to overcome the gap between the rich and the poor.

A Modern Example

A recent news story supports the idea that social class has a pivotal role in income inequality. Collins (2020) illustrates the gap between the rich and the poor through President Trump, who has paid between 0 to 750 dollars in taxes in recent years. Collins (2020) explains that most business owners can legally apply for tax breaks to pay as little as possible. Meanwhile, ordinary workers do not get the same leniency from the Internal Revenue Service and pay more of the percentage of their income in taxes than their wealthier counterparts. This division can be explained by the split labor market theory that views class as one of the main contributors to inequality in society (Fitzgerald 2014). There are multiple axes of inequality on the race-class-gender matrix (Berger and Guidroz 2010). President Trump is a white male who was able to use familial wealth to establish his own business. Overall, this example shows that social class plays a substantial role in income inequality, with race and gender being contributing factors.

References

Berger, Michele Tracy, and Kathleen Guidroz. 2010. The Intersectional Approach: Transforming the Academy through Race, Class, and Gender. Chapel Hill: University of North Carolina Press.

Collins, Chuck. 2020. The Worst Part of Trump Paying Zero Taxes? Its Probably Entirely Legal. The Guardian, Web.

Fitzgerald, Kathleen J. 2014. Recognizing Race and Ethnicity: Power, Privilege, and Inequality. New York: Routledge.

Income Inequality. PBS. 2007. Web.

Introduction

Although the USA is regarded as a country of unlimited opportunities, the income gap undermines peoples aspirations to make their American Dream come true. Diverse factors affect peoples income, and education has been seen as one of the reasons for income inequality in the United States. The link between education and peoples wealth is quite direct as people with higher education have higher salaries due to their prospects of occupying managerial or executive posts. Blue-collar workers who usually do not have higher education tend to have lower salaries.

Hence, it is believed that education is one of the potent factors contributing to the income gap in the USA. At the same time, some researchers note that the relationship between education and income is more complex (Hanauer, 2019). For instance, Hanauer (2019) states that the rate of people with a high-school education or a degree has increased since the middle of the twentieth century, but the income gap has been growing. It is necessary to analyze the link between education and income inequality in order to develop effective strategies to address the problem. This paper includes a detailed analysis of the effects of education on the income gap in the United States and potential ways to reduce this kind of inequality.

How Countries Can Measure Their Income Inequality

First, it is necessary to note that several methods to estimate the income gap exist. International institutions and countries choose among these measurements, which may lead to certain inconsistencies and issues. In addition, quite different variables can be used to define income, which may also lead to misunderstandings (Pfeffer, 2019). The most widespread way to measure income inequality is the comparison of the income rates of different populations (Ulu, 2018). Countries also identify the income gap by measuring the rate of people who live on an income that is beyond an established limit.

Each country collects statistical data through certain channels that are analyzed and sent to international institutions as well. In the USA, researchers often utilize the data of the US Census Bureau (Atems & Shand, 2018). The Panel Study of Income Dynamics (PSID) is another source of information for research. The PSID provides data for two decades, so long-term effects and trends can be traced with the help of this survey panels findings (Pfeffer, 2019). In addition to the identification of the rate of people with diverse levels of income, the GINI index is often used to assess the income gap. The index is a measure of income dispersion on a scale where zero is when everyones income is absolutely equal, and one is when one member of the group owns all the income.

Household income is the central variable that includes household members earnings. At the same time, social security contributions and income taxes are deducted (Organization for Economic Co-operation and Development [OECD], n.d.). That, these estimations do not involve such resources as financial aid, food stamps, or access to other opportunities, which can have a considerable effect on data (Ulu, 2018; Pfeffer, 2019). Hence, it has been acknowledged that these measurements are not perfect and further development of the methodology is necessary.

Effects of Income Inequality on the U. S. Economy

Income inequality may have numerous outcomes and shape the way a country develops. For instance, income inequality has a negative impact on the economic growth of a country as the spending of a large portion of the population decreases (Lee & Lee, 2018). Lower spending slows down economic growth as the segments of the economy do not have the necessary impetus for further development. Simultaneously, the income gap adversely influences human capital as many talented people may have limited access to education and employment. Quite a direct effect of this phenomenon includes the increase in peoples debts, which is a considerable threat to the economic balance. Real estate and educational loans have already become a substantial burden for Americans and the countrys financial system.

Clearly, such economic issues often become a trigger for social and even political issues. Social unrest caused by peoples dissatisfaction with their living standards and lack of opportunities may result in political turmoil (Lee & Lee, 2018). Political elites may use the situation to gain more power. In developing countries, where institutions are not properly functioning, people may be prepared for dramatic changes and even the use of violence. Such disturbances may lead to a political crisis that tends to be associated with economic stagnation.

Another area that is often affected by the increasing income gap is public health, which, in its turn, has a considerable influence on the economic development of a country. This link is specifically apparent in the USA, where the healthcare system constitutes a considerable part of the countrys GDP (Bor et al., 2017). It has been acknowledged that growing income inequality positively correlates with increasing health issues (Bor et al., 2017). For example, health-related risk behaviors become more pronounced, which leads to the development of diverse diseases. Smoking and alcohol use (as well as substance addiction) become a serious threat to public health. Moreover, hypertension, diabetes, heart failure, numerous mental health disorders, and other conditions persist as a result of economic problems people experience. Healthcare expenditure increases while people are still unable to contribute to the economic growth of the country, which results in major losses for the nation.

Gap Between Those Who Hold Bachelors and Higher Degrees and Those Who Do Not

It seems natural that people with a higher level of education have a higher income as they tend to have more skills and in-depth knowledge in specific areas. It has been acknowledged that people with a bachelors degree or higher degrees have a higher household income compared to those who have a high-school education or a lower level of education (Bialik & Fry, 2019). For instance, the gap between these cohorts in 2017 was dramatic as people with a bachelors degree or higher earned over $100,000 while those with high-school education had less than $50,000 (Bialik & Fry, 2019)., researchers note that this trend is likely to vanish in the near future as it is expected that jobs that do not require higher education will be demanded and, as a result, well-paid (Hanauer, 2019). Although such forecasts exist, the current situation suggests that a higher degree is associated with better employment and income.

Reasons for the Growing Inequality Gap Between Educated and Less-Educated Workers

As mentioned above, the major cause of the increasing inequality gap between employees with different levels of education is peoples skills and knowledge. Workers skills are seen as the primary assets contributing to individuals and companies competitiveness (Lee & Lee, 2018). For instance, such a highly competitive environment as information technology is characterized by the focus on exact technical, leadership, time and conflict management, as well as other skills. Higher educational establishments offer courses that equip students with the corresponding knowledge and skills. Companies that hire people who are able to generate new ideas and realize projects become more successful in the global market. People with higher degrees tend to generate more profit, so they are valued higher compared to those who have no degree. Regarding indirect effects, people with better employment have better access to resources, which intensifies the gap between the groups in question. Those who have well-paid jobs are likely to gain better loans, which has a positive impact on their financial stability. These people also have access to higher-quality health care, which positively influences their well-being and their productiveness.

Increasing Opportunities for Higher Education and Income Inequality

When evaluating the potential of increased higher education opportunities for Americans as a remedy for the inequality gap, conflicting conclusions emerge. On the one hand, the historical analysis of the link between educational background and income suggests that the relationship is not absolute. For instance, the level of education of baby boomers was considerably lower compared to the educational background of millennials (Bialik & Fry, 2019). However, the inequality gap was significantly lower, with slightly over $80,000 for holders of a Bachelors degree or higher and more than $51,000 for people with a high-school education or lower (Bialik & Fry, 2019). The income gap between these two groups was not as evident. So, it is possible to assume that at some historical point, higher education does not correlate with or is partially related to income inequality. Based on this data, it is also possible to predict a decreasing influence of higher education on the inequality gap due to the increasing rate of people with this educational background.

On the other hand, the peculiarities of the modern economy and the potential areas of development show that high-skilled employees will be equally valued or even valued higher in the future. The most promising segments of the economy include biotechnologies and information technologies. Being successful in these areas requires in-depth knowledge of some disciplines and specific skills that are associated with higher education. According to Hanauer (2019), the jobs that do not require a higher-education degree are expected to dominate the labor market for decades to come. The risk of the increasing unemployment rate is also forecasted to be high. Nevertheless, it is still evident that people who create value do and will have a higher income.

Other Causes of U.S. Income Inequality

Education is not the only or the most influential cause of the income gap in the United States. Families social status, parental income and educational level, and the persons gender, race, and age are among the other factors contributing to income inequality. It has been estimated that people whose parents have higher education are more likely to gain a bachelors degree or higher, which is associated with these peoples higher income (Pfeffer, 2019). People from disadvantaged families are also more likely to remain within the boundaries of their social stratum or even have a lower social status. In simple terms, rich families become richer, while underprivileged groups remain poor or become poorer.

The influence of gender on a persons income may seem ubiquitous, but male employees still earn more than women. Irrespective of various laws and regulations related to gender equality and non-discrimination, females have lower salaries and limited access to managerial positions. Interestingly, Hui (2020) notes that females contributed to the increase in income inequality in the 1980s considerably. During this period, women started playing a significantly more active role in the labor force. Females with higher education were likely to descend from middle-class or upper-class families, so the income gap grew.

Race is still an influential factor affecting peoples income although various steps have been undertaken to address the issues associated with racial discrimination. African Americans and Hispanics are still underprivileged groups who have a lower income and educational background (Hui, 2020). The enrollment and completion rate among these cohorts is lower compared to similar rates among white students. Racial minorities tend to have lower salaries and limited employment opportunities. Age is also a factor affecting peoples financial well-being as middle-aged workers are often less valued in the labor market.

Recommendations Regarding the Reduction of Income Inequality

The governments of many countries try to ensure the expansion of higher education and improvement of the quality of educational services. This tactic has been effective as education expansion is associated with the reduction of the income gap (Coady & Dizioli, 2018). Clearly, the implementation of this approach is associated with considerable investment of such resources as money and time. The U. S. government should also pay attention to this strategy and invest in the development of its educational system. The provision of more grants and scholarships, as well as the introduction of similar incentives, can be instrumental in reducing income inequality by addressing the problems related to student loans. The financial burden is now a considerable issue many young people have to address, choosing less attractive professional paths to get out of their debts. These choices often make these people confined to certain professional options that prevent them from improving their socioeconomic status.

Clearly, the provision of more grants and scholarships is only one of the possible methods to address the problem of the income gap. The government should also invest more in raising peoples awareness of the value of education and the role it can play in peoples lives. The promotion of higher and vocational education can help in solving the problem. In many cases, young people try to pursue academic goals that lead them nowhere to choose professions or programs that do not translate into successful employment (Hanauer, 2019). The government can invest more in raising students awareness regarding the labor market and the gaps they may find attractive. The promotion and popularization of some professions or skills can also be a good strategy for motivating students to choose professions wisely. Young people will be able to choose the courses that will equip them with the skills needed in the labor market, so they will be able to land good jobs and improve their socioeconomic status.

Federal and state educational programs can have a positive impact, while stronger decentralization can lead to higher inequality. Decentralization has proved an effective strategy in many areas, but it has some pitfalls when it comes to education. Ghosh Moulick (2019) found that school districts that gained more power due to decentralization started paying more attention to the needs of people with a higher income. Local elites tended to increase their pressure to make officials meet the needs of their children rather than concentrate on diminishing the education-based income gap in the community. Thus, decentralization leads to an increasing income gap as wealthy families obtain control over more resources.

At this point, it is necessary to add that the involvement of the government in the development of the educational system should not be overwhelming. Atems and Shand (2018) argue that income inequality positively correlates with entrepreneurial effort. The rise in entrepreneurship is manifested in the increased number of self-employed individuals and the growing number of small businesses. This trend has a positive impact on the development of the countrys economy (Atems & Shand, 2018). In simple terms, the gap is a potent motivational factor encouraging people to be more active. Therefore, instead of providing money to fund some educational programs, the government should also pay attention to supporting entrepreneurs. The provision of loans, grants, informational support, and other incentives can be instrumental in building a favorable environment for entrepreneurs.

In addition to addressing education-based income inequality, policymakers should pay attention to other factors contributing to the problem. By investing in the development of disadvantaged communities, the government can considerably reduce the existing income gap. Policymakers should work more actively with communities to understand their needs and be able to create viable and effective strategies. The government should not simply allocate more funds but ensure that provided investment is used effectively and addresses particular problems. The involvement of communities in the process of their development is critical. People should be ready to work hard to attain the goals they, in collaboration with authorities, have established.

Conclusion

In conclusion, income inequality is a serious issue American society is yet to solve. The problem has aggravated during the past decades, and it has been acknowledged that well-off families have become richer while poor people have become even poorer. The education-based income gap is one of the areas of major concern for policymakers as education is one of the influential factors leading to the increase in the gap. People with higher education receive higher salaries, which makes their access to resources, including education for their children, wider. People with high school or lower education can obtain blue-collar employment options or become a part of the unskilled worker pool. Such individuals have lower incomes and can ensure fewer opportunities for their childrens success.

It is important to make sure that people have more opportunities to obtain an education, but young people also need help in choosing the path wisely. That, such areas as health care also require proper attention. By living healthy lives and having access to quality healthcare services, people may improve their socioeconomic status. Finally, the government needs to continue its effort to reduce all types of discrimination with a focus on gender, race, and age. It is pivotal to ensure peoples equal access to employment and other opportunities in order to enhance diversity, which is associated with progress and positive changes. Supporting entrepreneurs in different ways can also boost the development of the economy, which, in its turn, will be the basis of the reduction of income inequality in the United States.

References

Atems, B., & Shand, G. (2018). An empirical analysis of the relationship between entrepreneurship and income inequality. Small Business Economics, 51(4), 905-922.

Bialik, K., & Fry, R. (2019). Millennial life: How young adulthood today compares with prior generations. Pew Research Center. Web.

Bor, J., Cohen, G. H., & Galea, S. (2017). Population health in an era of rising income inequality: the USA, 19802015. The Lancet, 389(10077), 1475-1490.

Coady, D., & Dizioli, A. (2018). Income inequality and education revisited: persistence, endogeneity and heterogeneity. Applied Economics, 50(25), 2747-2761.

Ghosh Moulick, A. (2019). Entrepreneurial to impactful management: Income inequality in education. Educational Policy, 1-18.

Hanauer, N. (2019). Better schools wont fix America. The Atlantic.

Hui, X. (2020). An empirical analysis of the impact of higher education on income inequality. Journal of Applied Finance & Banking, 10(2), 181-193.

Lee, J. W., & Lee, H. (2018). Human capital and income inequality. Journal of the Asia Pacific Economy, 23(4), 554-583.

Organization for Economic Co-operation and Development. (n. d.). Income inequality.

Pfeffer, F. T. (2019). Growing wealth gaps in education. Demography, 55(3), 1033-1068.

Ulu, M. 0. (2018). The effect of government social spending on income Inequality in OECD: A panel data analysis. International Journal of Economics Politics Humanities and Social Sciences, 1(3), 1-19.

Introduction

Over the centuries, society and social welfare as a separate notion have been considered highly individual matters that are closely correlated with the human perception of the aforementioned welfare in the first place. This perception is frequently formed through the prism of social background that is influenced by the events that take place in the world, and the trends of generally accepted behavior and communication in society. Researchers claim that despite all the struggles related to the definition of welfare, it could be interpreted as the combination of the key requirements for a person to feel a full-scale part of the social construct (Baranowski, 2019). The most appropriate examples of such human basic necessities could be found in Maslows pyramid of needs that, when in symbiosis, create a beneficial environment for an individual.

Like any positivist study, the notion of social welfare has an opposite research field that is known as welfare scarcity. The phenomenon could be defined as the impossibility to satisfy ones basic needs for social fulfillment, making the term of ill-being (Baranowski, 2019). Such dissatisfaction with the level of ones well-being could be perceived on both personal and collective levels. Hence, social welfare is quite an ambiguous notion that stands for the individuals evaluation of basic needs on the micro- and macro-levels of the social structure. As a result, modern society is replete with challenges facing people today, as it fails to meet all the expectations they create in terms of their well-being.

When speaking of peoples understanding of social welfare challenges today, the paradigm of the issues present in the world consists of various examples that are equally important in the context. In particular, the 21st century predominantly focuses on the issue of discrimination based on ones gender, race, and ethnic affiliation, creating major social discrepancies that later lead to the social gap expansion. However, the major issue caused by this discrepancy is the fact that the social gap has turned into a large-scale crisis in terms of the world economy, encouraging economic inequality development. Economic inequality as a notion stands for the disparities in the individuals incomes and wealth caused by various social, geographical, and financial aspects (Kraus et al., 2017). Hence, the primary aim of the following paper is to investigate the historical background of a social issue as well as to define the current stage of its development and prospects for the global community.

Historical development

When reflecting upon the roots of the economic inequality and the prerequisites it stems from, many people misinterpret the fiend they should pay major attention to in order to become at least one step closer to an answer. Whereas the vast majority sees the economy and politics as the main reasons for the social welfare challenges, it is the psychological aspect of the issue that matters the most in almost all cases. In fact, researchers claim that psychological analysis of the patterns of economic distribution provides society with valuable insights into the reasons why such inequality is still thriving in the first place (Bullock, 2019). Hence, the notion of inequality has always been present in world history due to human behavioral patterns in society since the genesis of the ancient civilizations.

Issue Origins

Throughout world history, the notion of economic inequality was rather an implicit issue than a large-scale catastrophe. Despite the fact that the development of economic inequality is replete with precedents that led to the increase in social gap and poverty between specific social groups, it also included the attempts to equate the discrepancy (Alfani, 2019). For example, the political ideologies promoted within a certain state influence a lot on the scope of the economic gap among its residents. Thus, the ideology of communism was aimed at eliminating economic inequality through people refusing from private property for the sake of the common good. However, such a system, while being economically beneficial was impossible due to the issue of individualism that was distorted as a result.

Capitalism as a Major Inequality Prerequisite

Later, an attempt was made to give people the right to fight to their own economic goals with the help of the free market genesis and competition. Such an effort is known in todays context as a political ideology of capitalism, being relevant in the vast majority of countries, and the US, in particular. The major idea behind the ideology lies in the general assumption that human beings are individualists who are to compete for their own good rather that create a community that could possibly exist in symbiosis (Hinton & Maclurcan, 2017). As a result, the culture of individualism that has become one of the central behavioral aspects in developed countries encourages the rise of discrimination and inequality for a number of reasons.

To begin with, the availability of a free market presupposes that people enter these markets on equal terms. However, the examples of such countries as the US show that the social background limits ones ability to compete, leaving thousands of people below the poverty line. Secondly, the genesis of capitalism has created a general assumption that the for-profit mindset is the major individual quality in todays world. Once this tendency is changed, and people do not feel the blind eagerness to profit from others, the socioeconomic gap can be reduced by replacing a focus on more important human aspects.

Economic Inequality Support and Opposition

While most people claim economic inequality to be the most important and challenging social welfare issue of the century, many of them do not dwell upon its roots and perception peculiarities due to their ignorance or tiredness of this problem being present in every life aspect. As a result, the notion itself lacks a critical approach in terms of the challenge analysis. The prime example of such a misinterpretation in the general attitude to the issue is the US  one of the leading states in the context of economic inequality.

Opposition Background

At one point, it seems that the issue of economic inequality cannot be regarded from a positive perspective due to its purely negative nature. In fact, the issue has many drawbacks for the middle-class representatives, who were born and raised in a democratic environment. The pillars of democracy claim that people are to be treated equally despite their racial, ethnic, religious, or gender affiliation. However, every day, local news is replete with examples of mistreatment and discrimination in terms of social relations and income. Hence, the economic inequality opposition has a full-scale right to be dissatisfied with the current industrial relations patterns.

Support Background

Nevertheless, some people feel as they are discriminated against because of the equality promotion. It was mentioned earlier in the paper that the psychological aspect of the issue claims that people would always be individualists who place their financial and emotional ambitions in the first place. Thus, the ones who were lucky enough to gain success in a so-called free market, do not feel the necessity to share their achievements with the ones who did not manage to work as hard as them. The democratic patterns of relations within the state presuppose that residents at a financial advantage should help the ones who need support. While the wealthy ones believe that they should not care about people who do not want to take care of themselves, they often forget that those people were initially at a disadvantage due to some social peculiarities. Hence, while the basic arguments of the economic inequality supporters might be understood, they are not exhaustive enough to outweigh the opposition of the following social welfare challenge.

Proposed Interventions

Bearing in mind that the social welfare challenges of economic inequality are now one of the most crucial issues the world is facing, it becomes clear that an increasing number of attempts are being made in order to combat the issue. Basically, these policies and actions could be divided into two major categories: governmental and non-governmental interventions in the social economy (Amis et al., 2017). To begin with, the implications of government intervention should be analyzed.

Governmental Interventions

The most visible complications of economic inequality are the instability and corruption in the labor market and a barely accessible healthcare system for the middle-class representatives. Both of these issues are to be meticulously controlled by the authorities with the help of modifying the already existing and non-working policies. According to CNBC as a primary US source, the fundamentals of political intervention in the fight with wealth inequality concern five major steps (Harwood, 2019):

• Investing in human capital by giving better access to healthcare and education;
• Raising the average wages for low-income and middle-class employees;
• Giving more autonomy to the workers, reducing the business owners influence;
• Expanding the infrastructure;
• Paying more attention to intellectual property management.

Although these intervention strategies influence both groups of the social structure, the wealthy are not the vulnerable ones in this case. Hence, expanding the opportunities spectrum for the low-income and middle-class workers is the direct responsibility of the government, which pled allegiance to providing help and support for its fellow residents. However, nowadays, there is little chance for the authorities to provide the required support, leaving most of the responsibility to the non-governmental initiatives.

Non-governmental Interventions

In the context of the 21st century, the launching of various non-governmental and charity initiatives to promote socioeconomic equality in the global community has become a widespread phenomenon. However, the credibility of such initiatives is quite ambiguous due to the peoples perception of help. Some people see these interventions as the only way to combat the issue without the desired governmental support. Others, however, feel like such help is superficial, being created to fulfill ones ambitions and take care of ones ego. However, regardless of the initial reason behind an action, an act of selfishness that brings a measurable outcome can be perceived as help in combatting the challenge of economic inequality. Such resources are generally divided into two categories:

• The ones focused on financial support and action towards economic equity;
• The ones that collect information and scholarly sources to make more people socially aware and concerned about the existing problem.

For instance, such non-governmental organizations as Open Global Rights draw worldwide attention to the already existing precedents of the income inequality, asking local residents and authorities to address the highlighted issues (About us, n.d.). Hence, taking into account the current scope of the interventions in the social welfare challenges of economic inequality, it might be concluded that people who face discrimination on a daily basis are, in fact, moving the power of change for a better future.

The Challenges Lasting Impact

It is practically impossible to trace back the spot on the timeline that would serve as a start date for the economic inequality genesis in the world. Ironically, it is also impossible to predict the approximate spot on the very same timeline that would put an end to this issue. The reason for this lies in the fact that any action related to this social welfare challenge complies with the fundamentals of the butterfly effect.

While seemingly developed countries do their best to improve the state economy, the financial situation of some individuals is affected to such an extent that the difference between the business owners and the middle class is calculated in billions of dollars. When speaking of this phenomenon in the US specifically, the economic inequality here is being both racialized and gendered, making it even harder to predict the issues future, as these issues are now the most significant in the context of the overall notion of equality (Michener & Brower, 2020). As a result, the world community will struggle with the implications of economic inequality for centuries, as people are still not ready to refuse from material goods for the sake of the worldwide stability.

For example, if to take a closer look at the following illustration followed by the New Yorker article (Metro-Goldwyn-Mayer, 2019), it might be understood that people now start to treat the issue with subtle irony and sarcasm, as they have already become tired of trying to act:

In such a way, a common recipient of the publicist literature in the 21st century is only armed with passive aggression and desperation due to the failure to make this world a better place for millions of residents. For this reason, the impact of socioeconomic inequality seems to be alive as long as humans live in the world, driven by their instincts rather than by common sense.

Personal Reflections

Living in a world where everyone faces inequality and discrimination on a daily basis, it is rather difficult to objectively evaluate the current social welfare challenge. The major reason behind this is, in my opinion, the abundance of emotions when dealing with the problem. In fact, if to look at the issue through the prism of pragmatics, the equality in society is an illusion, as no one who lives or ever lived on Earth was not able to witness absolute equality in the socioeconomic context. However, we were told from the very childhood that each human being was born in this world with the same opportunities and rights as others. Hence, all that could be done in the following situation is to keep trying to minimize the existing economic gap between individuals.

Conclusion

The following papers major purpose was to reflect upon the genesis and further development of economic inequality in society. As a result, it was established that despite close attention and ongoing attempts to combat the challenge, the issue would not be dealt with any time in the future. Thus, it is now of crucial importance to keep trying to make people more focused on their mental well-being and social role as community members instead of pursuing a constant desire to profit from others.

References

About us. (n.d.). Web.

Alfani, G. (2019). Wealth and income inequality in the long run of history. In Handbook of cliometrics, 1172-1201.

Amis, J., Munir, K., & Mair, J. (2017). Institutions and economic inequality. SAGE Publications.

Baranowski, M. (2019). The struggle for social welfare: towards an emerging welfare sociology. Society Register, 3(2), 7-19.

Bullock, H. E. (2019). Psychologys contributions to understanding and alleviating poverty and economic inequality: introduction to the special section. American Psychologist, 74(6), 635.

Harwood, J. (2019). 5 ways to fight wealth inequality, according to economists. Web.

Hinton, J., & Maclurcan, D. (2017). A not-for-profit world beyond capitalism and economic growth? Ephemera, 17(1), 147.

Kraus, M. W., Park, J. W., & Tan, J. J. (2017). Signs of social class: the experience of economic inequality in everyday life. Perspectives on Psychological Science, 12(3), 422-435.

Michener, J., & Brower, M. T. (2020). Whats policy got to do with it? Race, gender & economic inequality in the United States. Daedalus, 149(1), 100-118.

Metro-Goldwyn-Mayer. (2019). The rich cant get richer forever, can they? [Image]. The New Yorker. Web. 

Global inequality is a complex issue, the measurement of which is complicated by the number of factors involved. The problem of global economic inequality has pushed its way into the national and international conversation and the ongoing debates about the need to raise the minimum wage to ensure the improvement in the populations quality of life quality. However, the measurement of economic inequality is challenged by the evidence of a wide partisan gap in whether inequality is a problem that needs addressing (Milanovic, 2012). Besides, economists also have varied views on defining and measuring inequality. As suggested by Kennickell (2019), at first glance, economic inequality may seem a simple notion at first; however, operationally, it may include a variety of things based on the perspective being applied. There is general agreement that wealth is more unevenly distributed compared to income. Thus, it is imperative to look at the differences in the measurement and estimation of economic inequality, drawing from the discussions of the process of global income convergence within the last three decades.

Methods of Measurement

Complications with the measurement and estimation of global inequality stem from economists different approaches to measurement, including the Gini coefficient, the Lorenz curve, the Palma ratio, the decile ratio, and others. Equally as important is the consideration of what should be measured, whether it is consumption, pre-tax and after-tax income, or wealth, while also considering income sources such as capital gains, taxes, wages, and benefits (Trapeznikova, 2019). Thus, before economists choose a specific metric, they should make a decision about the dimensions of economic inequality to be measured. Such a choice is imperative not only from the conceptual standpoint but also because of the need to determine the instruments available to policymakers when correcting a given distribution.

While inequality of opportunity, characterized by the access to education, skills, health care, or work opportunities, is essential, inequality of outcomes is more likely to be measured because it is representative of the readily observable and measurable indicators of living standards, such as wealth and income (Sutcliffe, 2004). The next step entails distinguishing between income, wealth, and pay inequality as instrumental for showing disparities in wealth. Specifically, pay inequality represents differences in wages paid to different people, reflecting the variability in workers productivity, labor market discrimination of specific groups, and differences in the nature of the job.

Income inequality denotes the extent to which income is unevenly distributed across individuals and households. It captures labor-related earnings, capital income from dividends, interest on saving accounts, state pensions, and other relevant governmental transfers. Besides, it is possible to distinguish between individual versus family income, pre-tax versus after-tax disposable income, and labor earnings versus capital income. The final dimension of economic inequality in differences is wealth distribution, representing the stock of all assets that a person holds. These include a range of financial assets, such as savings, property, and stocks. It is also notable that income and wealth are not perfectly correlated because high earners may be in the higher end of the income distribution while being relatively poor when it comes to assets. Conversely, an elderly worker may have accumulated significant wealth while having low labor earnings.

The measurement of inequality among countries is concerned with the comparison of the distribution of wealth or income over a set period of time. The graph below illustrates income distribution in the United States, with the skewed shape with a long tail being typical for income distribution (see Figure 1). This means that most households earn below the average while very few households earn a very high income. Measures of inequality make an attempt to capture the dispersion of such a distribution. To be successful in comparing income distributions across countries over some time, inequality measures have to satisfy several criteria.

Specifically, there is a principle of anonymity, which means that all personal labels permutations within a given distribution, such as who earns what, should not have any effect on overall inequality. The population principle needs to be met in terms of ensuring that the measures of inequality are independent of an economys size. Thus, economists will find it possible to compare inequality in small and large countries regardless of the size of population and its aggregate income (Milanovic, 2012). Another important criterium is the relative income principle, which means that only relative income matters in the measurement of inequality, not income levels. Finally, inequality measurements must also satisfy the transfer principle, which entails the reduction of inequality when a certain amount is transferred from a richer individual to a poorer one while the recipient remains poorer than the donor.

The Lorenz curve and the Gini coefficient are the most commonly used methods applied in the measurement and representation of income inequality. While the Lorenz curve (see Figure 2) is a metric allowing for the quick visual comparison of inequality among countries, the Gini coefficient involves data from the entire distribution of income regardless of the size of a countrys population or economy in question (Trapeznikova, 2019). In the Lorenz curve graph, the cumulative share of income is represented by the y axis as earned by the poorest percentage of the population for all possible values on the x-axis. The 45% line denotes the line of equality when income is shared equally among all residents. However, if income is not shared equally, the curve is below the equality line, suggesting that the bottom percentage of the population earns less than the percentage of the total income in the country.

Following from the example of the Lorenz curve discussed above, it should be mentioned that the Gini coefficient is closely linked to it. It is defined as the area between the curve showing income inequality and the 45% equality line. Gini takes a value between 0 and 1; the lower the Gini value, the more significant is the equality in the country (Sutcliffe, 2004). The value of 0.5 and more is considered an indicator of high inequality, which characterizes countries such as South Africa (0.63), Namibia (0.59), Suriname (0.576), and Zambia (0.571), leading the list of the most unequal states globally (Index Mundi, 2019). The lowest Gini value is in countries such as Ukraine (0.25), Belarus (0.254), Slovenia (0.254), Moldova (0.259) and Chech Republic (0.259) (Index Mundi, 2019). It must be noted that the values of the Gini coefficient change depending on what is measured, whether it is wages, wealth, consumption, or before- or after-tax income.

Besides the Gini coefficient, there are other measures of inequality globally that summarize data from the entire distribution of income. Specifically, economists have used the coefficient of variation (CV) and the variance of the natural logarithm of income. The CV equates to the ratio of the standard deviation to the average income, and because it measures variability in relation to the mean, it does not depend on income levels. In a similar vein, the variance in log income is invariant of scales. Both CV and the variance of the natural logarithm of income agree with the Gini coefficient rank in instances when Lorenz curves do not cross but may differ in ranking.

Economic Convergence Considerations

In the 1990s, the was a trend of developing economies beginning to grow faster as compared to their advanced counterparts, in per capita terms, which inspired optimism that the output of the two groups could converge. Between 1990 and 2007, the average annual per capita growth of developing economies was 2.5 percentage points higher compared to their advanced counterparts (Dervi_, 2018). Furthermore, in the period between 2000 and 2007, the gap increased to 3.5 percentage points (Dervi_, 2018). Notably, although not all small economies progressed rapidly, on the aggregate level, the global economy changed, with Asia countries being particularly active led by the dynamic economies of India and China.

However, after the global financial crisis starting in 2007, the dynamics were shifting. At first, it appeared that convergence was accelerated, with advanced economies slowing down while the developing countries led in per capita growth increasing to 4 percentage points (Dervi_, 2018). Later, by 2013-2016, many emerging economies slowed down in their growth, especially when it comes to Latin American countries, while the growth of the US increased (Dervi_, 2018). While this does not necessarily mean the end of convergence, the worldwide technological advancement and the advent of cutting-edge robotics, AI, and bioengineering technologies made it harder for developing countries to show their cost advantage. However, convergence remains possible because of the potential to upgrade developing countries through investment in technologies. Developing economies will learn faster than advanced efficiencies to catch up with developed states. In addition, the countries will have to deploy new technologies in an efficient way, considering the role of labor-market skills and regulations. This task will not be easy to accomplish, and there are low chances of returning to the perfect state of convergence that was set before 2007.

It is notable that despite the per capita growth in developing economies due to the inflow of foreign investment, the automatic decrease in inequality should not be expected. In contrast, free markets are likely to increase income inequality within a country while lowering inequality between developed and developing economies. Moreover, declines in income inequality within countries cannot be achieved without the specific investment in technological advancement and human capital. On the one side, the example of countries such as China shows that tax reforms are necessary to be put in place to increase social program revenue (Lam & Wingender, 2015). On the other side, the example of Argentina shows that a country puts itself at a disadvantage when significantly relying on the export of agriculture for economic growth (OECD, 2019). Thus, successful economic convergence and the decreased economy is achievable if governments introduce policies for accumulating human capital, promoting technological progress, and establishing a welfare state.

References

Dervi_, K. (2018). The future of economic convergence. Web.

Index Mundi. (2019). GINI index (World Bank estimate)  Country ranking. Web.

Kennickell, A. (2019). The tail that wags: differences in effective right tail coverage and estimates of wealth inequality. The Journal of Economic Inequality, 17(4), 443-459.

Lam, W. R., & Wingender, P. (2015). China: How can revenue reforms contribute to inclusive and sustainable growth? IMF Working Paper. Web.

Milanovic, B. (2012). Global income inequality by the numbers: In history and now. Policy Research Working Paper. Web.

OECD. (2019). Agricultural policies in Argentina. Web.

Sutcliffe, B. (2004). Global world inequality and globalization. Oxford Review of Economic Policy, 20(1), 15-37.

Trapeznikova, I. (2019). Measuring income inequality. IZA World of Labor, Web.

Introduction

Most governments across the world have applied some of the remedies prescribed by the 19^th century economists. Some of the solutions applied include progressive tax rates, low population growth rates, minimum wage rates, and educational training. These remedies appear inadequate in preventing the prevalence of income inequality.

Even in advanced economies, they cannot stop increasing inequality. A surplus of workers in the labor market justifies lower wage rates through the market mechanism. Unemployment is persistent through all countries, despite training initiatives. On the other hand, abstract mathematical expressions have become the main form of studying and presenting economics.

Discussion

One might think that Ricardos solution was only applicable at a time when landlords were wealthier through collecting rent. Ricardo considered that the only logical and politically acceptable answer was to impose a steadily increasing tax on land rents.¹ Today, it is still applicable if land rents are replaced with personal and corporate income. Taxation is the only logical and politically way of taking more from high income earners and less from low income earners without creating higher political tension. There is no direct way of taking money from the wealthy and distributing it to the poor unless they give it out voluntarily as philanthropy.

Piketty talks about progressive tax, which has been applied in both advanced and developing economies.² Imposing high tax rates is one of the ways of reducing the rate at which capital owners accumulate wealth. It does not effectively redistribute wealth rather than alleviate the welfare of the poor by creating public utilities. It works in almost the same manner as charity. Taxation does not stop increasing accumulation of wealth by the rich. However, it prevents the occurrence of Marxs idea on the Principle of infinite accumulation.³ Without progressive tax, I perceive that the infinite accumulation of wealth by the rich would be the end result after several centuries of doing business.

Technology has been able to protect the world from experiencing the miseries predicted by Malthus.⁴ On the other hand, it appears unable to redistribute wealth within countries. It has shown the ability to redistribute income across countries through technology diffusion as in the case the emerging economies.

China has experienced protests of income inequality.⁵ It is an indication that even emerging economies may still experience income inequality despite adopting new more productive methods of production. It is not a surprise because advanced economies have experienced divergent income levels, even though they are pioneers in using the more productive methods. It appears that technology diffusion also provides ambiguous results within economies similar to the mobility of capital and labor.⁶

In a similar view as Piketty, I think that advanced economies should be at that point where the convergence of income levels occurs through technology. When most people in advanced economies are considered middle-income earners, the wealthy have moved further to higher income levels by trading in the global market. The global market is not easily accessible to individuals and small firms. Individual skills can benefit on the global market through working for the larger firms.

One of the ways through which technology is supposed to reduce income inequality is through productivity. However, as productivity increases a firm needs fewer workers. If it needs more workers with increasing efficiency and productivity, then there must be a firm somewhere else that is shutting down because it is becoming less competitive. The author says growth can harm some groups when benefitting others.⁷ It occurs in the case where China has substituted advanced economies in the global market.

There is a drive to produce more commodities with the lowest quantity of inputs. For those firms that lay off workers as a result of productivity, the workers can occupy the labor market. It creates a higher level of unemployment because there is a lag of time between reducing the number of workers and the creation of new jobs. With more workers in the labor markets, the laws of supply and demand proceed to undercut wage rates. When people are waiting for technology to take charge, the capitalists have become wealthier by paying lower wage rates.

Unemployment is one of the factors that will always reinforce income inequality. Technology diffusion cannot eliminate unemployment because unemployment is one of the factors that support favorable conditions for trade through lower wage rates. It becomes necessary for most governments across the globe to set the legal minimum wage rate to protect the capital owners from exploiting the opportunity for lower wages.

Lower wage rates will be persistent provided that there is unemployment. I consider a situation where an employer can find an employee who can accept lower wages because there are many workers in the labor market who cannot hesitate for a job opportunity. If there is very little unemployment, employers will need to give higher and more attractive wage rates to persuade employees to exchange job positions between firms. With minimal unemployment, the employers will have no option but to pay higher wages.

Another aspect of technology is that it creates a surplus of lowly skilled labor and a scarcity of highly skilled labor. With a surplus of lowly skilled labor, they can be paid lower wage rates and the highly skilled can be paid very high wage rates. As Piketty suggests, top earners can quickly separate themselves from the rest by a wide margin.⁸

What we need to find out is the number of top earners. If I am working in a large bank, the top earners may be less than ten considering the president and the vice presidents in every department. On the other hand, the lower level workers are counted in thousands. From this, you can get a clear picture of how many top earners will be separated from the rest. It works to create income divergence.

I concur with the author that knowledge and appropriate skills are a powerful force of income convergence.⁹ Indeed, it increases mobility through social classes. However, there are a few people within economies who have climbed through the ranks to be among the wealthy. There are those who have gained wealth by being innovators and those who are in top management positions. Thousands of students graduate each year with the knowledge and appropriate skills. Firms can only hire a few because they have to manage labor costs.

Not all of us with knowledge and appropriate skills can be employed as managers to be wealthy neither can we all be innovators. There is only one president in a country and there is only one president in a firm, despite the fact that many are willing to do that job. There are more graduates trained in mass communication than all studios, radio stations, and TV stations can hire. The supply and demand mechanism creates its own equilibrium. Knowledge and skills uplifts many to become middle-income earners, but it does not stop income divergence.

Piketty has referred to China as attracting capital because it has the appropriate skills.¹⁰ I think the main forces that attracted capital in China are lower labor costs and the large local market. If skills were the only determinant, advanced economies would be more preferred than China. Lower labor costs in China do not reduce income inequality. Capitalists are targeting China because it offers more returns to capital than advanced economies. The end result is that more income inequality among individuals occurs, even though the GDP may indicate that the country is getting wealthier. Today, China leads in creating inequality.¹¹

Piketty claims that policies on taxation and finance are some of the key factors that have contributed to the increase of inequality.¹² I am not sure of the effects of taxation. However, I am very sure that finance increases inequality. Only the wealthy can easily get finance to start new businesses and expand existing ones. The wealthy are also likely to be charged a lower interest rate because they provide collateral. As a middle-income earner, the commercial bank will require that I provide my pay slip to ascertain that I usually receive regular streams of cash flow. I am considered riskier, so they may charge me a higher interest rate. Large companies are usually charged very low interest rates compared to individuals, which increases income divergence.

I would like to open a fast food shop that sells seafood delicacies, but I have to save for a very long time before I can set it up. If I succeed in one shop, I would like to open several shops. However, I may need to wait longer to have enough capital to convince banks to provide additional capital. The wealth of the rich is enough to convince banks to provide additional cash. As a result, the wealthy grab more business opportunities than those who rely only on wages. The money creation process of banks assists the wealthy to become wealthier discriminately.

The author claims that the tragedies predicted by Malthus, Ricardo and Marx have passed without happening. I realize that economies around the world have been able to avoid the predicted miseries partly because they have applied some of the remedies given by the 19^th century economists. For example, most advanced economies have taken measures to reduce population growth. Most advanced economies have a lower population growth rate compared with their economic growth rate. Most economies have used progressive tax to reduce the rate at which the wealthy are getting wealthier.

Countries have set minimum wages despite some economists protesting that the market mechanism should set its own wage rate. The persistent unemployment would have ensured that workers are underpaid without the legal minimum wage rate set by governments. The predictions have not occurred. However, we have also changed the factors that the 19^th century economists considered to make predictions.

When I began my course in economics, I wondered why every concept in economics has to be expressed in mathematical terms, considering that it was a social science. Knowledge of advanced mathematics is essential to study economics after the undergraduate level.¹³ Even at the undergraduate level, mathematical skills provide a great advantage.

Differentiation was among the first calculations, I came across. It was the differentiation of the production functions with respect to quantity. It is used to determine the right price or quantity to produce to obtain optimal returns. However, in my small vegetable business I realized that markup is the easily applicable method. If a business does not provide the right markup, I would shut it down. If the goods are selling very fast, I would increase the price.

I realized that the maximizing formula used in economics gives the end result after all these price and quantity adjustments have occurred. It is abstract, but it explains what has happened to find a stable price known as the equilibrium price. The only challenge the economic formula creates is that in reality the production function is very complex to create. There are very many factors that affect a business quantity demanded and price. It may be difficult to quantify demand before you create the supply and generate some sales.

The mathematical methods used are abstract and the interpretation needs more competence from an economist. I agree with Piketty that modern economists have put more effort into making economics more mathematical. They want it to appear more scientific than other social sciences. In economics, a scholar has to use mathematical expressions to be considered seriously by peers.¹⁴ It occurs frequently that economists must use calculations to predict or explain markets without acknowledging that the variables they have used cannot be accurately measured.

Personally, I have usually doubted the accuracy of the GDP in developing economies. Later, I realized that even advanced economies have business transactions that are carried out without any records. I rarely meet the GDP referred to as an estimate, but as an accurate figure. In class, I realized that almost every economic concept has to be built from the abstract formulas, some of which cannot be quantified in the real world.

Economists have chosen to major in abstract calculations. The author states that income, capital, the economic growth rate, and the rate of return on capital are abstract concepts.¹⁵ Most economists use the abstract models to predict the future of markets and economies. The use of mathematical expression has been on an upward trend since the early 1990s.¹⁶

It declined in the 1980s. In the 1990s, it started to increase steadily. I think statistically analyzed historical data may be a better tool than models, which rely only on theories to make predictions. The models could not forecast the global financial crisis in 2008 or the great depression of 1929-1940.¹⁷ The outcome in both cases was different from what theorists expected. As an economist, I am not barred from using both historical data and models to make better predictions.

Conclusion

Governments have taken necessary steps to reduce the rate at which the rich accumulate capital through progressive taxation. Advanced economies have gone further to keep population growth at very low levels. Most governments support policies that encourage training for technical skills and knowledge. However, all these efforts appear inadequate to prevent increasing income inequality. Countries have different policies on capital accumulation.

Capitalists will always seek economies with less aggressive taxation policies to ensure that their capital grows at a higher rate than income. In the meantime, China provides that option. One thing that can be done is to have a policy that requires highly profitable firms to redistribute part of their profits as employee benefits. The first step will be to determine the acceptable level of profitability. Most economists would not support such an idea because it interferes with self-regulating markets.

Bibliography

Bernanke, Ben. Essays on the great depression. Princeton: Princeton University Press, 2009.

Beuke., Dan. Chinas Wealth Disparity Erupts in Wukan Protests. Bloomberg Businessweek. 2011. Web.

Espinosa, Miguel, Carlos Rondon, and Mauricio Romero. The Use of Mathematics and Its Effect over a Scholars Academic Career. 2011, Web.

Piketty, Thomas. Capital in the Twenty-first century. Translated by Arthur Goldhammer. Cambridge: The Belknap Press of Harvard University, 2014.

Roberts, Dexter. Chinas Income-inequality Gap Widens beyond U.S. Levels. Bloomberg Businessweek. 2014, Web.

Footnotes

1. Thomas Piketty, Capital in the Twenty-first century, trans. Arthur Goldhammer. (Cambridge: The Belknap Press of Harvard University, 2014), 7.
2. Thomas Piketty, Capital in the Twenty-first century, trans. Arthur Goldhammer. (Cambridge: The Belknap Press of Harvard University, 2014), 34.
3. Thomas Piketty, Capital in the Twenty-first century, trans. Arthur Goldhammer. (Cambridge: The Belknap Press of Harvard University, 2014), 9.
4. Thomas Piketty, Capital in the Twenty-first century, trans. Arthur Goldhammer. (Cambridge: The Belknap Press of Harvard University, 2014), 7.
5. Dan Beuke, Chinas Wealth Disparity Erupts in Wukan Protests, Bloomberg Businessweek, 2011, Web.
6. Thomas Piketty, Capital in the Twenty-first century, trans. Arthur Goldhammer. (Cambridge: The Belknap Press of Harvard University, 2014), 21.
7. Thomas Piketty, Capital in the Twenty-first century, trans. Arthur Goldhammer. (Cambridge: The Belknap Press of Harvard University, 2014), 22.
8. Thomas Piketty, Capital in the Twenty-first century, trans. Arthur Goldhammer. (Cambridge: The Belknap Press of Harvard University, 2014), 23.
9. Thomas Piketty, Capital in the Twenty-first century, trans. Arthur Goldhammer. (Cambridge: The Belknap Press of Harvard University, 2014), 22.
10. Thomas Piketty, Capital in the Twenty-first century, trans. Arthur Goldhammer. (Cambridge: The Belknap Press of Harvard University, 2014), 22.
11. Dexter Roberts, Chinas Income-inequality Gap Widens beyond U.S. Levels, Bloomberg Businessweek,  2014, Web.
12. Thomas Piketty, Capital in the Twenty-first century, trans. Arthur Goldhammer. (Cambridge: The Belknap Press of Harvard University, 2014), 20.
13. Miguel Espinosa, Carlos Rondon, and Mauricio Romero, The Use of Mathematics and Its Effect over a Scholars Academic Career, 2011, Web.
14. Miguel Espinosa, Carlos Rondon, and Mauricio Romero, The Use of Mathematics and Its Effect over a Scholars Academic Career, 2011, Web.
15. Thomas Piketty, Capital in the Twenty-first century, trans. Arthur Goldhammer. (Cambridge: The Belknap Press of Harvard University, 2014), 32.
16. Miguel Espinosa, Carlos Rondon, and Mauricio Romero, The Use of Mathematics and Its Effect over a Scholars Academic Career,  2011, Web.
17. Ben Bernanke, Essays on the great depression, (Princeton: Princeton University Press, 2009), 71.

Leibbrandt and Shipp break down the source, cause and solution to the income disparity in South Africa. Their findings tackle how the bridge between the rich and poor, gender and racial inequalities, equalization workers’ wages and salaries, stability of the middle class and the division caused by the need for some form of tertiary education. This essay will explore a more circumstantial point of view towards their points.

The most unmistakable way to combat income inequality in South Africa is to address the networks of income as a whole. Thus meaning, we need to analyze statistically where, how and whom is the money of our economy branching towards. The prevalence of income inequality is due to the enormous gap between the rich and the poor. This gap allows people who are wealthy to stay wealthy and people who are poor to stay poor. People who have less skill are most likely to be more susceptible to low income and no employment. The solution to this problem is to implement education consistently at a young age, develop skills, and match people’s skills with their work as many people struggle to find jobs even after they have received education.

The need for educated people in South Africa has increased, this need enlarges the gap between the rich and poor. Everyone seeks the need to be sustained, secured and happy. This need and increased competitiveness, when it comes to your level of education, has caused income inequality to grow exponentially due to the fact that – people who are rich will have a better education and eventually end up in a high earning career field thus securing their wealth. People who are poor will not receive tertiary education, not getting a job and the cycle of poverty will continue.

The equalization of workers’ wages and salaries are deeply rooted in the dynamic problems of the business. Dynamic problems such as compensation discrimination which is when people work correctly and do not get paid equally as other people doing their exact same work. Once we extirpate discriminations against race, gender, age or sex, the salaries and wages of a certain career field will reach an equilibrium. The Government and businesses need to adopt improved policies that ensure workers are getting paid correctly and that no fraudulent crimes are occurring in the business.

Policies around wages, tax and social grants have reduced the income inequality to some extent but it is not sufficient. The sufficiency of these policies is reduced due to the poor services delivery and protection given by the government. The high level of corruption, fraud, immorality and unlawfulness in the government system has caused deficiencies in the policies that supposed to reduce income inequality such as rich people are becoming richer by coercing people in the workplace, citizens are not aware of their rights which means they become susceptible to exploitation like getting paid under minimum wage and lack of administrative structure which means grants are given to people who don’t qualify for it thus keeping the poor in poverty.

The socio-economic sphere of South Africa has been re-constructed, reshaped and repackaged into a sphere that marginalizes groups into minorities causing problems such as income inequality. Problems arise because people are deprived of their full potential – patriarchy in the work-place causes women to feel inferior which prevents them from working, discrimination because of your skin color, which results in people not making use of their opportunities and the lack of social reconciliation towards people who were affected by apartheid.

Due to apartheid majority of South Africans are situated in the middle-class working sector. The stability of the middle class will create a platform where income equality will be optimized. In relation to tax and transfer systems, the progressivity in South Africa should be improved. This means that people in the middle-class should not be paying for tax more than people who are in the upper-class (earning more money). Income inequality goes beyond income, in order to stabilize the middle income, we need to improve their working conditions, better their tax and transfer systems and consider their emotional well-being.

In South Africa, if you fall into the top earning bracket many things fall into favor. Firstly, fraudulent crimes become easier to get away with. Secondly, you have more security on your assets and can afford a lawyer. Lastly, it’s easier to accumulate generational wealth meaning that you will make it easier for your next generation to become wealthier. This causes income inequality as people who are rich stay rich and deprive people who actually worked instead of buying their way into something.

The decrease and increase in salary – a short term solution to our income equality problem. The gap in earnings between unionized and non-unionized workers will eventually increase so in order to end this problem is to improve the security system of how the income is being distributed and how the policies are being implemented. If this were to happen, less people will be paid under minimum wage, workers’ will be protected against discrimination, entrepreneurship will increase, more people will follow their passion and the gap between the rich and poor will decrease.

In order to address income inequality, we need to navigate towards a more liberal society that does not involve discrimination, an economy with a more stabled tax and transfer system, a country where income is distributed equally and improve our education system. Income inequality is a problem that multifaceted with many sources, causes and solutions. I believe that through more research such as this brief done by Murray Leibbrandt and Timothy Shipp, we are navigating South Africa to a destination of income equality.

Within every population, there is a discongruity as to how much a citizen will earn inside of their economy. They are experiencing income inequality. You may be asking yourself, what is income inequality, exactly? “Income inequality is a phrase that is used in reference to the uneven distribution of individual or household income among a given population” (Schiller, pg. 40). In order for income inequality to exist, there must be a source of income, more specifically, several sources. “These sources may be combinational or independent per person receiving the income. Income may result from wages, rent, bank account interests, salaries or even profits made in business transaction” (Stiglitz, 2012). In his hypothesis, Karl Marx foresaw income inequality in a capitalistic as a major problem that would lead to an economic evolution. Every country’s economy across the globe has complications with income inequality, Including the United States, which dates back to the early 1920’s. Though, the United States is not the only commonwealth facing an income inequality, there are several countries that have a worse income inequality than our nation. In China and other third world countries, it is rumored that they are continuing to work their children at a young age, much like the United States did back in the 1920’s. I don’t think that child labor laws will be changed in all countries, but I am glad that this is something that we, the United States, have abolished.

Today, we have many different incomes for people even if they are not working. They have the income transfers, along with taxes. Taxes are also a critical mechanism for redistributing market incomes. A progressive tax does this by imposing higher tax rates on people with larger incomes. Under such a system a rich person pays not only more taxes but also a larger portion of his or her income. Thus, a progressive tax makes incomes more equal than before-tax incomes (McGraw-Hill, pg.42). It is not just taxes, they are only half the redistribution story but income transfers that consist of government payments, such as social security, Veterans payments, and welfare benefits.

While income inequality continued to rise after the 1970s, the 2001 and 2007-09 recessions caused top incomes to fall sharply. However, these losses were temporary. Owyang and Shell noted that the incomes of the top 1% captured about two-thirds of overall income growth during the period 2002-07, according to Piketty and Saez. Further, even though top incomes fell 36.3% in the 2007-09 recession, the incomes of the bottom 99% also decreased 11.6%. This decrease is the largest two-year fall in the incomes of the bottom 99% since the Great Depression. It’s important to note that growth from 2013 to 2014 was more equal. Owyang and Shell noted that the incomes of the bottom 99% grew 3.3%, the highest in more than 10 years. It also means the Gini coefficient on household income has declined slightly, the first no recession decreases since 1998.

Income inequality has increased in the United States over the past 30 years, as income has flowed unequally to those at the very top of the income spectrum. Current economic literature largely points to three explanatory causes of falling wages and rising income inequality: technology, trade, and institutions. The existence of different explanation points to the difficulty of pinning down causes of inequality (Baranoff, 2015).

Some contributing factors to these changes would be protecting consumers by preventing individual business firms from becoming too powerful, in the extreme case, a single firm might have a monopoly on the production of a specific good. Also, by protecting the labor it has helped with the contribution of the changes in today’s inequality. With the government regulating how labor resources are used today in the production process, this has helped with the inequality. In 1920, children between the ages of ten and fifteen were employed in mines, factories, farms, and private homes. From picking cotton and cleaning shrimp to pressing tobacco. Today, our children must be a certain age to work and I believe that is fifteen, they can work younger than that babysitting and odd jobs such as that, but nowhere to the extreme of mines and factories. Children do work on family farms at a young age as well (Schiller, pg.42).

With all the recent changes to the income inequality, I think that in a way the countries have come a long way and have helped the American people to be more enough with income. With the jobs being more stable that helps the working class sustain a steady income. I know that right now with everything that is going on in my community we are losing jobs and not gaining jobs. This is very hard for people and we have a lot the depend on the government benefits such as welfare. I think that has hurt a lot of the younger generation by relaying on that and not wanting to go out and get a job and provide for their families.

According to the Federal Reserve Bank, the average black family holds less than 15% of the wealth of the average white family. While white families have median and mean net worths of $171,000 and $933,700, a black families’ median and mean wealth is $17,600 and $138,200. Hispanic families also earn substantially less, with a median and mean net worth of $20,700 and $191,200, respectively. A clear racial wage gap exists in the United States. This paper explores the extent to which it affects American society. The studies discussed in this paper show that racial income inequality has a mainly negative effect, as it relates to increased crime rates, poor health among minority groups, and discrimination.

Crime

Income inequality has an effect on crime rates in United States. A study conducted by Judith Blau, ‘The Cost of Inequality: Metropolitan Structure and Violent Crime’, analyzes factors related to high crime rates in US cities (1982). These factors include southern location, percentage of blacks, poverty, and racial income inequality. The study found that once the variable of racial income inequality was controlled for, the other factors lost their influence on crime (Blau, 1982). Cities are a good sample for this investigation, as the diversity of a city is unique to that environment. Inhabitants of cities are forced to live in proximity with people of different incomes. Therefore, property crimes and crimes motivated by racial injustice are likely more common in these areas. This correlation does not prove that racial income inequality causes higher crime rates, but it does identify it as a contributor. Thus, indicating that the unbalanced economic system of the U.S. is linked to violence in its society. However, the injured parties in violent crimes are not the only victims of racial income inequality. The perpetrators also suffer the effects of this issue, as evidenced by the racial imbalance in prisons. The data described by Bruce Western’s study ‘Beyond Crime and Punishment, Prisons and Inequality’ states: “White high school dropouts are about 1.5 times more likely to have a job than those who were black”, and that “59% of black dropouts in their early thirties have a prison record, while only 14% of white dropouts do” (Western, 2007, pg 38-41). Due to their lower employability, it is reasonable that black dropouts are more likely to be sent to prison for committing a crime out of economic necessity. Once released, their employability decreases further due to their prison record, and they are once again motivated to obtain money illegally. This self-reinforcing cycle only strengthens the relationship between income and crime. However, other experts argue that this relationship is ambiguous. A paper titled ‘Does income inequality really increase crime?’ by Alejandro Corvalana, conducts an analysis of data collected in 37 studies on income inequality and crime around the world (2018. pg 24-25). The study had inconclusive results, but mentioned some cases in which wealth inequality reduced crime. The authors argue that as inequality increases, private protection by the rich increases, which then reduces crime. Although the study did not identify any correlation, most sources that only cover the United States do. This is not surprising, as America’s cultural melting pot is unique to its society. Furthermore, it indicates that the correlation between racial income inequality and crime may not be applicable to every society, but likely is to America’s.

Health

Racial income inequality has detrimental effects on the health of minority groups. In a survey conducted by the study, ‘Racial Differences in Physical and Mental Health: Socioeconomic Status, Stress, and Discrimination’, blacks reported lower levels of psychological well-being, higher rates of ill health, and more bed-days than whites. Williams also found that stress caused by the discrimination in the workplace accounted for these racial differences in health. Once race-related stress was controlled for, the mental health of blacks surpassed that of whites. Income discrimination motivates stress and insecurity, further limiting the potential success of minorities. In addition to damaging mental health, income inequality may also be harming physical health. A study titled ‘Racial Segregation, Income Inequality, and Mortality in US Metropolitan Areas’ uses the The 1990 Gino Coefficient and the Dissimilarity Index to assess income inequality’s association with poor health and mortality rates in segregated areas. The study discovered a strong correlation, suggesting that the racial wage gap or its accompanying factors, are harming the health of minorities. A possible explanation is that minorities living in poorer neighborhoods have limited access to medical resources. Furthermore, the mental health problems described in the earlier study, may also take a toll on their physical health. However, not all experts agree. A third study, ‘Income Inequality and Population Health’ measures the effects of income inequality on other aspects of health (infant mortality rates and life expectancy) and found no effect on these factors. The study does not contradict the findings of the ones mentioned previously, as it does not investigate mental health and mortality rates. However, it does limit the extent to which income inequality is affecting the health of America. Although it may not affect all aspects of health, a correlation between income inequality and poorer health has been identified.

Discrimination

Racial income inequality is a huge part of discrimination in America. This manifests itself through the unequal educational opportunity among races. A study titled ‘Opportunity at the Crossroads: Racial Inequality, School Segregation, and Higher Education in California’ found that that differences in educational quality begin in high school, as Black and Latino majority schools were found to have lower teacher retention rates, less qualified teachers, and a weaker academic program. Furthermore, the acceptance rate of all ethnic groups for a UC school was higher if they attended a White or Asian majority high school. The study indicates that colleges in California may have a racial bias in their admissions process. This unbalanced educational opportunity only widens the gap over generations. Minorities, who receive poorer incomes than whites, usually cannot afford an equal education. As a result, the employability of minorities diminishes, increasing poverty and leading to crime, as discussed previously. However, even when minorities are as qualified as whites, they do not receive equal job opportunities. Similarly to the racial bias found in UC admissions, a selective bias may also exist for employment. A field experiment conducted by Bertrand and Mullainathan, mailed job applications to Boston and Chicago employers. These applications had equal credentials, but were assigned different names associated with Black or White Americans. The study found that resumes with white sounding names received 50% more callbacks (2004). The results prove that racial discrimination still exists in the US workplace. Minorities are constantly burdened by the negative effects of racial income inequality, and discrimination prevents them from improving their socioeconomic status.

Solution

Although some studies may argue its effects are ambiguous, most studies show that income inequality negatively affects the U.S. If measures to end racial income inequality are not executed, the gap will widen over generations and continue to harm American society. The first step toward income equality is ensuring educational equality by redistributing each state’s education budget. Currently, the funding of public schools relies on the taxes paid by its surrounding neighborhood; wealthy neighborhoods can pay for better schools. Instead, state taxes should be distributed equally throughout the state, enabling each public school to receive an equal budget regardless of where it is located. Once education in poor neighborhoods is improved, dropout will become less common and crime will be reduced. The health of minorities will also improve, as students will have access to healthier cafeteria food. The next step involves reducing discrimination. Eliminating names from college and job applications would limit the racial bias in admissions or employers. Monetary punishments can also be delivered to workplaces found guilty of discrimination. This would reduce the stress of minorities and improve their health. Furthermore, it would enforce true equality in America.

We have all heard the phrase of income inequality in our lives. But few of us actually thought about it or even consider thinking about it. Before diving into solutions, what is causing this problem in the first place is essential because without knowing the issues of what causing this problem in the first place and looking for solution will lead us to nothing. There are several reasons why some people are paid millions while some barely earn minimum wage.

According to Henry Hazlitt’s ‘Economics in One Lesson’ (1988), “Wages are a function of the market price of skills required for a job”, which means the labor market decides the wages one will get. That means if a large number of workers can offer the same skills, then demand for the job will decrease. The significant development in technology also widens the income inequality. According to ‘Causes of Economic Inequality’ (National Debate Blog), “Growth in technology arguably renders joblessness at all skill levels. For unskilled workers, computers and machinery perform a lot of tasks these workers used to be do. In many jobs, such as packaging and manufacturing, machinery works even more effectively and efficiently”. Hence, jobs involving repetitive tasks have largely been eliminated. Skilled workers are not immune to the nightmare of losing jobs. The rapid development in artificial intelligence may ultimately allow computers and robots to perform knowledge-based jobs. Another significant matter is Gender. According to the U.S. Census Report (2004), “In America, the median full-time salary for women is 77% of that of men. However, women who work part time make more on average than men who work part-time. Additionally, among people who never marry or have children, women make more than men”. Another factor is education. According to Gary Becker’s and Kevin M. Murphy’s ‘The Upside of Income Inequality’, “Individuals with different levels of education often earn different wages. The higher the education skill the fewer workers will able to offer”.

Now that we have looked at few reasons, we can look at few solutions. Raising the minimum wage has a significant impact on income inequality According to the Deutsche Bank Research (Asia Economics Monthly, 12 February 2015), “The government of Singapore, a nation that takes economic growth seriously, has overseen sustained increase in median income for Singaporeans over the last five years. Median monthly income from work of full-time employed citizens increased by 30% during the period. The technocratic government achieved this increase by public sector initiatives to raise incomes of low-wage workers. Yet, the unemployment rate of Singapore remains a low 1.9%”. But the minimum wage must be tied with expenditure. If the expenditure increases with the minimum wage, then this will have no significant effect. It also has limitations as “There’s only so much you could do in terms of making workers more expensive without actually harming the people you’re trying to help”, Kearney said. Another thing that can be done is quality education. Michael Spence, a Nobel Prize-winning economist, found that higher education leads to value-added jobs, which have higher incomes. Education begets higher wages, so education must be a priority to end rampant inequality. As Harvard’s Steven Strauss writes in the Huffington Post, the 2% unemployment amongst highly skilled workers in 2006 and 2007 is indicative of a skills shortage. Such a labor shortage leads to higher wages for the highly skilled. However, the many individuals who fail to achieve such skill levels enter fierce competition for low-skilled jobs, driving down wages and increasing inequality. Education solves this problem by turning out more highly skilled workers who will earn high wages. Another thing can be expanding businesses and infrastructures. Kearney says: “That’s like electricity to a previous generation, so that’s an obvious infrastructure investment that would make a place more conducive to job growth”. Better roads, airports, bridges will create more opportunities for businesses hence boosting the economy. Bolstering human capital will also help to minimize income inequality. “We could tax more from all the folks at the top to spend money making investments in the people who are being left behind”, says University of Maryland economist Melissa Kearney. That includes access to affordable health care, job training, apprenticeships and vocational education. Most important is improved basic education, beginning with prekindergarten programs for 3- and 4-year-olds. “I don’t think education by itself is a solution to income inequality”, says MIT’s David Autor. “It’s the best tool in our toolkit”. Altering corporate governance is another way to cope up with this. As Autor says, “It’s possible to imagine adjustments to the structure of corporate governance that would think a little harder about additional stakeholders and potential beneficiaries aside from just owners”. Democratic presidential candidate Elizabeth Warren has proposed that workers at a corporation be allowed to elect 40% of the board of directors. According to Stock Buybacks, Similar arrangements in Germany have resulted in much more limited use of one manifestation of shareholder capitalism.

In conclusion, the road to solve income inequality is a long stretch but we have to take small steps at a time to figure out this. Otherwise, this will stretch of road will go beyond our solving capability.