What Can We Do About Income Inequality In The USA?

[james.hendrickson]

So, economic inequality is rearing its ugly head again - especially with relatively fragile state of the economy.

Given that this is such a massive problem - and in light of the current debate about the Black Lives Matter movement, what can be done to reasonably address this?

According to the data, the problem appears to be getting worse since the 1980s, not better.


Source: Pew Research.

Here is another pretty good video on the subject.

https://www.youtube.com/embed/QPKKQnijnsM

A couple of factors to consider:

1. We need infrastructure, roads, railroads, police and courts, etc. etc. Reasonable government services cost money. If we lower the tax on everyone this helps everyone financially, but it limits the ability of government to do its job. If we raise taxes on everyone, these reasonable things are better covered but it negatively affects everyone financially.

2. Do tax increases really matter for people with higher incomes? Is $1 to a person who makes $20,000 a year the same thing as $1 to someone making $2,000,000 a year?

[Fishindude77]

Why is income inequality a problem?
Would it be better if everyone earned the same amount regardless of effort put forth or life decisions?

Taxes increases on the rich won't change anything. The top 1% of earners in US currently pay 37% of the overall taxes paid, while the bottom 90% only pays 30%, so very few are currently paying most of the taxes.

[disneysteve]

Why is income inequality a problem?

A quick Google search would give you a whole host of reasons.

US states and foreign countries that have higher levels of income inequality have higher levels of crime, teen pregnancy, mental illness, obesity, lower healthcare outcomes, higher incarceration rates, lower economic growth, lower life expectancy, more food insecurity, and more of pretty much every other social ill you can think of. Income inequality affects people at both ends of the spectrum. It isn't just something that impacts the poor so it is in everyone's best interests to work to close the gap.

[Fishindude77]

A quick Google search would give you a whole host of reasons.

US states and foreign countries that have higher levels of income inequality have higher levels of crime, teen pregnancy, mental illness, obesity, lower healthcare outcomes, higher incarceration rates, lower economic growth, lower life expectancy, more food insecurity, and more of pretty much every other social ill you can think of. Income inequality affects people at both ends of the spectrum. It isn't just something that impacts the poor so it is in everyone's best interests to work to close the gap.

So do you think someone working at McDonalds should be paid the same as you, or would you be willing to work at McDonalds pay to reduce that inequality?
I know the answer but this is the absurdity of the whole "income inequality" discussion.

GIven the amount of government handouts currently available there are many people at the lower income levels that are quite content and will not do anything extra to raise their living standards.
And compared to other parts of the world, the poor in the US live pretty good. You don't see poor obese people in most other countries.

Taking more away from the rich isn't the right thing to do. They're already paying the majority of the taxes. The businesses they own also employ and support much of the population that wants to work. What's the incentive to build wealth and build your businesses if the government can step in and take whatever they deem fair from you?

[disneysteve]

So do you think someone working at McDonalds should be paid the same as you, or would you be willing to work at McDonalds pay to reduce that inequality?

I realize you're being intentionally extreme, but that's not how it works. Improving income inequality doesn't mean paying everybody the same amount regardless of what they do. It does mean improving services for all, though. Universal healthcare, pre-K education, investing more in our public schools, ending residential segregation, strengthening safety net programs, making the tax code more progressive, and yes, raising minimum wage. Those are all things that can help close the gap.

Improving income inequality does not mean you won't still have people with more and people with less. That's always been the case and will always be the case. But any chart or study you can find anywhere will clearly show that the gap has greatly widened over the past few decades.

[bjl584]

Money is a mindset
I think it was Jim Rohn who said that if you took all of the money in the world and evenly distributed it to everyone in the world, within 2 years inequality would be right back to the way it was before

This is one of those chicken and egg questions.
Does bad behavior lead to income inequality or is it the other way around?

Government can't do much effectively or efficiently.
Simply throwing more money at a problem and creating more and larger social programs probably won't fix anything.
It can be argued that social programs have caused a lot of the problems that we see in this country.

No easy answer here

[Fishindude77]

Good points, here are some others:

Universal healthcare - Folks at the bottom currently pay zero for what healthcare they utilize and with ACA healthcare is currently very cheap for anyone low to mid income. Seems to me, giving everyone free healthcare would most benefit those currently at higher income levels.

Pre-K education, investing more in our public schools - Not a fan of this, our public schools are already money pits that take 70% of our property tax revenue. I would be in favor of dramatically changing what is covered by our education spending, such as dumping a whole lot of the money sucking athletic programs and putting those dollars to better use educating kids. I'm guessing athletic programs and facilities consume half or more of a schools spending in some locales?

Ending residential segregation - How you think this can be dramatically changed? People tend to live close to those of the same mindset, race, religion, etc. This is an income issue in my mind. So long as you have social programs that pay close to the same as low to mid level jobs you are going to struggle to get many to go to work to try and better themselves.

Making the tax code more progressive - Does this mean you are willing to pay more taxes? I think I currently pay plenty while a lot of folks in the same stores and restaurants we frequent pay little to none. I do like the idea of a flat tax, rather than the complex system we have.

Raising minimum wage - So would you propose we pay the McDonalds and WalMart employees a starting wage of $15 / hr nationwide? Jobs like that that pay minimum wage were never intended to be careers, they were for kids and young adults entering the workforce, a retiree or mom that wants some part time work, etc. Do you want to see the price of a Big Mac go to $10-15. There are lots of good career jobs out there and business struggles everyday to find people to fill the roles. My business constantly struggled to get new people; we started green kids out around $15/hr and with a little effort and incentive they could pretty quickly get up to $20/hr, show some leadership and responsibility and you could soon be $75k or more annually, also had a great benefit program. Drug testing knocked a lot of them out, basic showing up to work on time every day eliminated a lot, and a whole lot more quit when they figured out they actually had to do mental and physical work every day. Every hands on skilled trade position out there is starving for employees.

[disneysteve]

Universal healthcare - Folks at the bottom currently pay zero for what healthcare they utilize and with ACA healthcare is currently very cheap for anyone low to mid income. Seems to me, giving everyone free healthcare would most benefit those currently at higher income levels.

The number one cause of personal bankruptcy in this country is medical debt. Clearly whatever we're doing currently isn't working and isn't providing affordable care to everyone. There's a huge difference between having affordable health insurance and actually being able to afford your care.

Pre-K education, investing more in our public schools - Not a fan of this, our public schools are already money pits that take 70% of our property tax revenue. I would be in favor of dramatically changing what is covered by our education spending, such as dumping a whole lot of the money sucking athletic programs and putting those dollars to better use educating kids. I'm guessing athletic programs and facilities consume half or more of a schools spending in some locales?

I don't disagree with you here. I think extracurricular activities like sports and music and theater are critically important. And sports is by far the biggest money-suck whether you're talking about middle school, high school, or college. How those programs are funded needs to be reevaluated.

Ending residential segregation - How you think this can be dramatically changed? People tend to live close to those of the same mindset, race, religion, etc.

There's no short message board answer to this one but if you are actually interested, do a search for "how to address racial segregation" and read some of the essays on the topic.

Making the tax code more progressive - Does this mean you are willing to pay more taxes? I think I currently pay plenty while a lot of folks in the same stores and restaurants we frequent pay little to none. I do like the idea of a flat tax, rather than the complex system we have.

I am absolutely willing to pay more taxes if that money actually gets used to make the country a better and more equal place for all.

Raising minimum wage - So would you propose we pay the McDonalds and WalMart employees a starting wage of $15 / hr nationwide?

I think minimum wage should have been inflation-indexed from the day it was created in 1938. Had they taken that simple step, it would be a non-issue. Instead, here we are with a minimum wage that on Friday will mark 11 years since it was last raised. Has your cost of living increased since 2009? Mine sure has.

[Fishindude77]

I am absolutely willing to pay more taxes if that money actually gets used to make the country a better and more equal place for all.

Pretty much the biggest problem we face.
They tax us a dollar and by the time it gets through the bureaucracy a nickle makes it to the intended target.

[kork13]

This is one of those chicken and egg questions. Does bad behavior lead to income inequality or is it the other way around?

Government can't do much effectively or efficiently.
Simply throwing more money at a problem and creating more and larger social programs probably won't fix anything.
It can be argued that social programs have caused a lot of the problems that we see in this country.

No easy answer here

I have alot of thoughts about this on both sides of the issue, but these are two of the big points for me. There are most certainly a variety of factors endemic within our social & economic systems that contribute to (or worsen) economic inequalities in our country. But I've seen over & over that the federal government is almost totally incapable of meaningfully improving our society, except through financially supporting the work of private entities or state/local governments. If it's a federal program, there's basically zero doubt in mind that it will feature high levels of fraud, waste, and abuse.

Trying to be brief with some immediate thoughts.... I believe that the best way to address the most extreme inequities is through dramatically improving financial literacy, career-focused training/education (college, trade school, and so on) with an emphasis on weening people OFF of public assistance, addressing systemic high-crime areas (a massive issue of its own, but crime & fear of crime suppresses wages & business development), and increasing the mobility of people within & between cities (think mass transit & high-speed rail), .... Just for starters. But except in the case of building infrastructure, I think the feds need to stay out of it. Just coordinate efforts & funding at the state/city/private level.

[disneysteve]

emphasis on weening people OFF of public assistance

About 2/3 of people who get food stamps are children, elderly, and disabled folks. The same is true for various other social programs. Most of the benefits support people who can't work for some reason. There are also many people who get benefits who do work but just don't make enough to live. There's a persistent perception that welfare is a bunch of able-bodied people who just choose not to work and that just isn't the reality.

We'll never make progress as long as we keep blaming poverty on the poor. Not saying you were necessarily doing that, but it is a very common mindset.

[kork13]

About 2/3 of people who get food stamps are children, elderly, and disabled folks. The same is true for various other social programs. Most of the benefits support people who can't work for some reason. There are also many people who get benefits who do work but just don't make enough to live. There's a persistent perception that welfare is a bunch of able-bodied people who just choose not to work and that just isn't the reality.

We'll never make progress as long as we keep blaming poverty on the poor. Not saying you were necessarily doing that, but it is a very common mindset.

Absolutely true. But often, those people have caregivers, parents, guardians, etc. Who are underemployed or simply in dead-end jobs not making enough. I'm my mind, any household receiving public assistance should be "targeted" (not the right word, but it gets the point across) for career-enhancing training or job placement. If you can get them into better jobs, they no longer become reliant on public aid.

Part and parcel with that is reforms to the public aid programs. My understanding is that there's a benefits cliff that once someone goes above some limit, they go from receiving a few hundred dollars of benefits to zero. The program should, at most, be a 1:1 reduction in benefits... I might almost be supportive of something where they lost maybe 75¢ per dollar earned... I wonder if that would be an enticement toward earning higher incomes, rather than people not wanting to earn more for fear of losing their benefits off the cliff.

[disneysteve]

Absolutely true. But often, those people have caregivers, parents, guardians, etc. Who are underemployed or simply in dead-end jobs not making enough. I'm my mind, any household receiving public assistance should be "targeted" (not the right word, but it gets the point across) for career-enhancing training or job placement. If you can get them into better jobs, they no longer become reliant on public aid.

So let's say you successfully do that and get most of those low paid folks into better jobs where they no longer need assistance. Then what? Other people need to move into those jobs and they'll need assistance. Those "dead-end jobs" won't magically go away.

My understanding is that there's a benefits cliff that once someone goes above some limit, they go from receiving a few hundred dollars of benefits to zero. The program should, at most, be a 1:1 reduction in benefits... I might almost be supportive of something where they lost maybe 75¢ per dollar earned... I wonder if that would be an enticement toward earning higher incomes, rather than people not wanting to earn more for fear of losing their benefits off the cliff.

That is absolutely true and is one of the huge faults in the system. If you earn one more dollar, you could entirely lose health insurance for you and your family. Who in their right mind would want to earn more under those circumstances?

[kork13]

So let's say you successfully do that and get most of those low paid folks into better jobs where they no longer need assistance. Then what? Other people need to move into those jobs and they'll need assistance. Those "dead-end jobs" won't magically go away.

But doesn't that perspective just relegate those people to the very inequity that we'd like to eliminate? Consider WHO is holding those jobs. Should a 45-y/o man/woman with a family/kids be flipping burgers for McDonald's earning minimum wage? No! At that point in life (peak earning years) you should be pursuing (and on track for) a career using their skills, experience, and abilities to their advantage. Minimum wage jobs should only be held by young folks with no experience, no skills, no responsibilities, and do on. They're called entry-level jobs for a reason.

As for "someone's got to fill them," I'd argue that business will figure out what's to more efficiently use people. For example, McDonald's use of the ordering screens takes the jobs of multiple servers, and transitions it to a couple skilled technicians (who definitely earns well more than minimum wage). And what about those other servers who are no longer needed? There are thousands of businesses desperate to find people with the appropriate skills. It can't happen immediately, but over time, the system will adjust to what's available in the market. Build it (skilled people) and they (the jobs) will come.

I'm sure this is vastly oversimplified & optimistic... But that's just what I see as the best way ahead, at least as a goal to work toward.

[disneysteve]

Should a 45-y/o man/woman with a family/kids be flipping burgers for McDonald's earning minimum wage? No! At that point in life (peak earning years) you should be pursuing (and on track for) a career using their skills, experience, and abilities to their advantage. Minimum wage jobs should only be held by young folks with no experience, no skills, no responsibilities, and do on.

The problem is those "young folks" aren't working like they used to. Forty years ago, about 60% of teens 16-19 were in the workforce. Today, it's only about 35%. There are various reasons for that but after school and summer jobs are far less common than they used to be for young people. That's who traditionally was flipping burgers and flinging fries. That's left employers with no choice but to hire older people to fill those positions.

You're certainly right that automation and technology is helping to reduce the number of menial jobs out there. A cashier is easily replaced by a self-serve kiosk for ordering food or a self-serve register for checking out at the grocery store. But there are still plenty of jobs that require a human but only pay minimum wage or close to it.