Question

1. IS NOW THE TIME IN OUR COUNTRY’S HISTORY FOR US TO CHANGE OUR CURRENT SYSTEM OF INCOME DISTRIBUTION AND WEALTH DISTRIBUTION? IF SO, just in general terms, what should we do? Why?  

2. Our government is delivering an extra $600 per WEEK in extra, special unemployment benefits to SOME, but NOT ALL, of the workers who have experienced a drop in wage income owing to the pandemic and the recession. This extra payment is set to expire on July 31, 2020. Should this payment be extended past July 31? Why or why not?

Answer 1

1. Yes,Americans Want to Live in a Much More Equal Country. The inequality of wealth and income in the U.S. has become an increasingly prevalent issue in recent years. One reason for this is that the visibility of this inequality has been increasing gradually for a long time--as society has become less segregated, people can now see more clearly how much other people make and consume. Owing to urban life and the media, our proximity to one another has decreased, making the disparity all too obvious. In addition to this general trend, the financial crisis, with all of its fall out, shined a spotlight on the salaries of bankers and financial workers relative to that of most Americans. And on top of these, and most recently, the upcoming presidential election has raised questions of social justice and income disparities, bringing the issues into focus even more.

It is relatively easy to think about inequality as being too great or too little in abstract terms, but ask yourself how much you really know about wealth distribution in the U.S. For example, imagine that we took all Americans and sorted them by wealth along a line with the poorest on the left and continuing as wealth increases until on the right we have the richest. Now, imagine that we divide them into five buckets with an equal number of citizens in each. The first bucket contains the poorest 20% of the population, the next contains the second wealthiest tier, and so on down to the wealthiest 20%.

The reality is quite different. Based on Wolff (2010), the bottom 40% of the population combined has only 0.3% of wealth while the top 20% possesses 84% . These differences between levels of wealth in society comprise what's called the Gini coefficient, which is one way to quantify inequality.

This is the level of wealth inequality that exists in America, and it is clearly higher than people think, but in Goldilocks-esque fashion, we can ask: Is the real level of inequality too high, too low, or just right? When economists consider the desirable level of inequality, they usually define the ideal inequality from the perspective of economic efficiency: What level of inequality will motivate people to be the most productive and move up the wealth ladder? What level of inequality will allow those at the top to lift up society as a whole (say, by having the resources to invent new technologies)? What level of wealth will keep salaries low and competition high? And so on.

This is one approach to assessing the desirability of wealth inequality, but Mike Norton and I wanted to examine this question from a different perspective--that of regular (non-economist) people--and we wanted to examine inequality in terms of its effect on society as a whole, not just in terms of economic efficiency. After all, inequality is not just about economic efficiency. It's also about our day-to-day experience as citizens, the influence of envy, our social mobility, the importance of equal opportunity, our mutual dependency on each other, etc.

2. The CARES Act, a $2.2 trillion relief package enacted in March, greatly expanded unemployment benefits, in part by tacking a $600 weekly enhancement onto traditional benefits paid by the states.

State benefits generally replace less than half a worker's prior take-home pay. The $600 enhancement aimed at fully replacing prior wages for the average worker (about $1,000 a week).

But not all workers are average — some make more and some less, relative to prior pay.

Researchers at the Becker Friedman Institute for Economics at the University of Chicago found that about two-thirds of workers eligible to collect unemployment insurance can receive benefits that exceed lost earnings.

Normally, it's not ideal policy for unemployment benefits to exceed job pay, according to labor economists, who said it may cause distortions in the labor market. Republicans have argued it could create a disincentive for people to return to the workforce.

Yet many believe it was good policy at the time, when the health crisis forced people to shelter in place rather than work.

Perhaps more important, antiquated state unemployment systems couldn't handle a change to their benefit formulas to ensure pay didn't exceed prior wages, according to economists and lawmakers.

That update would have delayed payments by weeks or even months, causing undue hardship for Americans relying on the aid to pay rent and food bills, they said — which ultimately pushed Congress to compromise on the $600 benefit, which was administratively easier.

States have struggled to pay claims even with the simpler formula. Some jobless workers went months without seeing one check.

Even now, three months after the lockdowns began, Eugene Scalia, the Trump administration's top labor official, refused to say during Senate testimony whether states would be in a place to cap benefits at 100% of individuals' prior wages.

'Barely' survive

The $600 in extra aid is scheduled to end after July 31.

Democrats want to extend it, but Republicans, emboldened by unexpected job gains last month, are unifying in opposition against it.

That complicates the situation for workers like Marfoglia, who can't yet return to work and depend on the enhanced benefits for their livelihood.

Marcus, a food server at a Boston-area Marriott hotel who was furloughed in March, would get about $300 a week from Massachusetts' unemployment system absent the extra benefits.

His state unemployment pay doesn't factor in tip income and is therefore lower than it would be otherwise. Massachusetts, among the most generous states, pays up to $1,200 a week to recipients.

"I'd survive [without the $600 benefits], but barely," Marcus said.

Research shows that a large share of Americans across all income bands were teetering on the edge of financial hardship even before the pandemic.

About 46% of people who make more than $75,000 a year live paycheck to paycheck or spend more than their means (via credit cards, for example), according to a Finra Investor Education Foundation reportpublished in 2019. That's true of 62% who make between $25,000 and $75,000 a year, and for 70% of those who make less than that.

Democrats passed a bill in the House of Representatives that would extend the $600 benefit until early next year. They've also proposed gradually reducing the aid by tying it to economic conditions like a state's unemployment rate.

But Republicans want the policy to end after July, arguing that Congress should be promoting work over unemployment.

The economy added 2.5 million jobs in May, versus an expected loss of 7.5 million.

'Economic shock'

The ability to return to work isn't necessary a given, though.

There are still 21 million people who remain unemployed.

The country's 13.3% unemployment rate, while lower than April's 14.7%, is still higher than at any period since the Great Depression.