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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.
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