Question

Discuss the things you believe contribute the most to income inequality, and make some suggestions as to how to decrease income inequality.

Answer 1

Causes of Inequality

• One cause is our enhanced support of free market capitalism and less progressive spending on social services.
• Decline of labor unions allows employers to not increase wages and not implement safety regulations.
• Due to Globalisation jobs are leaving America for other countries where they can pay lower salaries.
• Technology has taken jobs from low-skilled workers.
• Superstar hypothesis: the best gets a lot, while runners up don't get much in comparison.
• As per financialization, incentives are more stockbased, high paid people are more concerned with helping themselves than helping their laborers. They will cut costs even if it means firing people.
• Due to immigration lots of uneducated people have immigrated to America, raising competition for American born high school dropout.

Suggestions to reduce Inequality

• Raising the minimum wage as thus will help low wage workers to earn more wage.
• Extend the Earned Income Tax Credit to different types of households as this will raise their disposable income.
• Subsidize health-insurance for low-wage employees. This will help them to save expenses in insurance and thus increase their income.
• Make the tax system more progressive. A progressive tax system ensures increase of tax liability with increase in income thus ensuring more equality.
• Encourage greater unionization. This will help in saving the workers from exploitation and through bargaining they can earn better wages.
• The idea of a guaranteed annual income.