Help wanted: Income inequality needs a solution
BridgeND | Thursday, October 1, 2015
Income inequality has become a noteworthy issue in this 2016 election cycle, and it is likely the issue will continue to attract attention from voters and candidates alike. The numbers are polarizing so they are easy fodder for media sensationalism — according to the Pew Research Center, the richest 20 percent of families in the United States in 2013 earned 61.8 percent of all income and controlled 88.9 percent of all wealth.
Political movements like Occupy Wall Street in September 2011, as well as the 2007 financial crisis and ensuing recession, have brought income inequality to the forefront of the national conscience. Pope Francis, who recently visited the United States and became the first pope to address Congress, has made his position on rampant economic inequality clear, decrying the “economy of exclusion” in 2013 and repeating to Congress his declaration that “poverty and hunger must be fought constantly and on many fronts.” Presidential candidates have spoken out on the issue: Former Secretary of State Hillary Clinton has spoken of targeting capital gains if she is elected, Sen. Marco Rubio (R-FL) noted that “much of the recovery over the last couple of years has gone to such a small segment of the population,” and Sen. Bernie Sanders (I-VT), who is running as a Democrat, has become notorious for railing against unchecked inequality.
Many of the candidates in the field have addressed the issue, which is especially noteworthy for Republicans, a large share of whom had previously regarded the issue as “class warfare.” A Gallup poll released in February showed two-thirds of Americans were “dissatisfied with the way income and wealth are distributed in the U.S.” Income inequality has become a political issue both parties cannot afford to ignore, but what is the basis of the economic issue?
The answer to that question is tremendously complex. Economists and policymakers place blame on a host of policy decisions and economic and political movements. The three most popular answers are globalization and technological advancements, the decrease in labor union membership and opportunity inequality.
Many economists credit globalization with exacerbating the existing inequalities inherent in our economic system and our social structure. Regional trade pacts like the North American Free Trade Agreement (NAFTA) of 1994, along with a global trend recognizing the benefits of trade liberalization, have profoundly shaken up labor markets within the United States. Corporations have outsourced manufacturing jobs that would ordinarily be reserved for American low-skilled workers. These jobs are now occupied by low-skilled workers from countries where wages are cheaper, increasing profit per unit for many American companies like Apple and Nike. The jobs that remain in the United States requireon average a broader skillset and higher education.
Concurrently, membership in labor unions has decreased notably since 1985. Many point at President Reagan’s busting of the air-traffic controllers strike in 1981 as the moment when unions began to lose their teeth and their voices. It should be noted that President Reagan was legally entitled to fire striking PATCO workers and that the strike was the product of PATCO’s bad-faith negotiations. However, Republicans like Wisconsin Gov. Scott Walker have invoked Reagan’s politics to bust other union activity. In Walker’s case, the union was not one representing government workers whose job concerned the public’s safety, but teachers. The collective bargaining power unions possess had a tremendous impact on their wages and benefits, and the absence of strong unions has exacerbated economic inequality. To illustrate this, for example, one must consider the wage contracts unions negotiated which tied productivity to wages. As productivity went up, wages would go up, creating a strong incentive for workers to innovate, produce more and provide more revenue at a lower price for the company, all while benefiting from higher wages. With the influx of technological advancements over the last 30 years contributing to a productivity boom, union productivity contracts would lead to much higher wages for workers. In the absence of union activity, according to the Economic Policy Institute, productivity (as defined as the output of goods and services per hours worked) grew by about 74 percent between 1973 and 2013 , while wages increased at a rate of only nine percent during the same time period. Coincidence? Probably not.
Lastly, opportunity inequality leads to income inequality, and income inequality leads to opportunity inequality. The likelihood of a child graduating from college is directly correlated to the family’s wealth and income. A report authored by the University of Pennsylvania and the Pell Institute for Study of Opportunity in Higher Education showed that in 2013, 77 percent of adults from families in the top income quartile earned at least a bachelor’s degree by the time they turned 24. For those in the lowest quartile, the number was nine percent. Consider the effect this has on job prospects, particularly in the new, globalized labor landscape described above. The reality of the issue is that income inequality and opportunity inequality lead to cyclical poverty. There is a well-documented correlation between the wealth of a neighborhood and the efficacy of its public schools, mainly the product of property taxes but also subject to factors like crime rates, family values and gentrification. If you are from a poor neighborhood, the odds are stacked against you — according to a U.S. Department of Education report, in 2009 poor students (bottom 20 percent of all family incomes) were five times more likely to drop out of high school than high-income (top 20 percent of all family incomes) students. Forget college — imagine looking for a living-wage job without a high school diploma. Poor children are likely to work lower-paying jobs and live in poorer neighborhoods in their adult lives, providing troubling prospects for their children. No matter your party affiliation or political philosophy, it is easy to see this is a major problem in need of a hard-hitting solution.
Agreeing on solutions is usually more difficult than agreeing on the problem, especially from a political standpoint. BridgeND seeks to bring people together from across the political spectrum to discuss issues like economic inequality in a mature and focused manner. In an age where members of both parties substitute ad hominem attacks for policy, BridgeND offers a refreshing feeling of cooperation and reminds us that both sides should remain focused on the advancement of America’s interests.
Liam Dalton is a freshman in the College of Arts and Letters and intends on majoring in International Economics and Chinese. BridgeND is a bipartisan student political organization that brings together Democrats, Republicans and all those in between to discuss public policy issues of national importance. They meet Tuesday nights from 8-9 p.m. in the McNeil room of LaFortune Student Center. They can be reached at [email protected] or by following them on Twitter @bridge_ND