Problem Solution Essay Final
Globalisation
refers to the process of integrating markets around the world, allowing
international free trade, increasing capital flow and growth of multinational
companies (Economics Online, n.d.). With international free trade, many
companies produce their goods and services globally, such that parts could be bought
from one country and the final product is assembled in another, and in return
the companies cut costs. But, it is usually the big companies that have the
capabilities to take on this process, this in turn causes the small companies
to lose out. With the big companies being able to increase their profits and
the small companies not able to, there is an increase in corporate income
inequality, which can lead to increase individual income inequality. This is
what is happening in America (Armir, 2013). Income inequality is severe in
America, such that America’s top 10% earns nine times more than the bottom 90%
on average (Institute for Policy Studies,
n.d.). This essay will be discussing on why income
inequality in America should be address, if the current measures taken are
enough, and suggestions to help tackle income inequality.
Income
inequality causes many negative type of consequences and one important
consequence would be the state of poverty. With high income disparity, America
experience high poverty rate as mass number of its population is not earning
enough to cover the cost of living. According to povertyusa.org (n.d.), 47
million people lived in poverty for the year 2014, which means that 15% of
America’s population are in poverty. This happens because it is usually the
wealthy people that could afford to improve themselves to be qualified for the
high paying jobs, thus resulting in the rich becoming richer and the poor
becoming poorer. Therefore, if the income inequality continues to increase,
America’s poverty rate would also increase as the poor would continue to be
unable to improve themselves.
Minimum
wage law is one of the methods adopted by America to counter income inequality.
Minimum wage law requires the employer to pay an employee at least a minimum
amount for his/her service, which the federal amount stands at $7.24 per hour
currently (United States Department of Labor [DOL], n.d.). While the minimum
wage helps to lessen the income inequality by making sure the population earns
at least a certain amount, it is not very effective. This is because with the
minimum wage law, many employers end up only paying the minimum amount to the
employee (Lombardo,
2014). This would result in
income inequality to worsen as America’s top 10% continues to earn more, but
the rest would be capped at the minimum amount. Therefore, minimum wage law is
a counterproductive measure against income inequality.
Like
many countries, America adopts the progressive income tax measure which
requires employee to pay income tax according to the amount they earned. This
is a very good way to counter income inequality as it tries to lower the amount
that the top 10% earns. However, in the long run, income inequality would not
be solved. This is because while the citizens who earns lesser are charge
lesser, the amount earned is still several times lesser. According to Institute for Policy Studies (n.d.), America’s top 10%, on average, earns estimated nine
times of the bottom 90%. This shows that even though it tries lessen the impact
of income inequality, the impact is not great and in the long run, as the top
10% continues to earn more, the income inequality is going to keep increasing
unless the bottom 90% pay increases on par with the increase of the top 10%.
Instead of taking money away from the higher
earners, America should empower the lower wage earners to be able to earn more
by making higher education more
affordable and making skill building courses more available. In the current
generation, full-time working college degree holders have a $17,500 annual
earnings more than high school diploma holders (Kurtzleben, 2014). As people
with a college degree earns more than a high school graduate, by making higher
education more affordable, more people would become more competitive and
qualified for higher paying job. Currently, average college tuition fee for a 4
years studies is $43,000 for private school and $21,700 for public school, this
is a 12 times increase as compared to 35 years ago and it surpasses the increase
of inflation (Quandt, 2013). With such expensive college fees, only the rich
are able to afford it easily. This result in the rich becoming more qualified
for high paying jobs while the rest remained stagnant and income inequality
worsen. For non-college going people, having skill building courses made
more available would make them more competitive. With the globalized markets
advancing at an increasingly fast pace, new occupations appears and replace
others, and in each job, skills required are ever changing (International
Labour Office, 2010). By responding to these changes with skill building
courses, the lower wage earners would become more qualified and are able to
better compete for these jobs. Therefore, by making
higher education more affordable and making skill building courses more
available, the poorer would become more qualified for the high paying jobs and
thus lessen the income disparities.
In
conclusion, income inequality in America is a major issue that should be
heavily addressed or it would cause detrimental consequences such as high rate
of poverty. Currently, the measures taken such as minimum wage law and
progressive income tax are good solutions. However, they would not have much
impact in the long run. Rather, making higher education more affordable and
skill building courses more available would help the low income earners to become
more competitive for high paying jobs and thus lessen income inequality.
Word
count: 947
References
Amir. (2013, March 14). Inequality and Globalization
[Video file]. Retrieved from https://www.youtube.com/watch?v=A_mgJr2ocCI
Economics Online. (n.d.). Globalisation. Retrieved
from Economics Online:
http://www.economicsonline.co.uk/Global_economics/Globalisation_introduction.html
Institute for Policy Studies. (n.d.). Income
Inequality. Retrieved 11 March 2016, from http://inequality.org/income-inequality/
International Labour Office. (2010). A Skilled Workforce for Strong, Sustainable
and Balanced Growth: A G20 Training Strategy. Geneva: ILO publications.
Retrieved from http://www.oecd.org/g20/summits/toronto/G20-Skills-Strategy.pdf
Kurtzleben, D. (2014). Study: Income Gap Between Young
College and High School Grads Widens. U.S.News.
Retrieved from http://www.usnews.com/news/articles/2014/02/11/study-income-gap-between-young-college-and-high-school-grads-widens
Lombardo, C. (2014). 9 Critical Pros and Cons of The Minimum Wage | NLCATP.org. Nlcatp.org. Retrieved 30 March 2016,
from http://nlcatp.org/9-critical-pros-and-cons-of-the-minimum-wage/
Poverty Facts | Poverty Rate, Poverty Thresholds &
Census Information. (n.d). Povertyusa.org. Retrieved from
http://www.povertyusa.org/the-state-of-poverty/poverty-facts/
Quandt, K. (2014). College has gotten 12 times more
expensive in one generation. Mother Jones. Retrieved from
http://www.motherjones.com/politics/2014/09/college-tuition-increased-1100-percent-since-1978
United
States Department of Labor. (n.d.). Minimum Wage. Retrieved 11 March
2016, from http:// www.dol.gov/general/topic/wages/minimumwage