Income Inequality

Income Inequality
Income may be defined as money that is earned for work that has been done over a particular period. This period may be a week, a month or even a year depending on what the parties agree. It also includes the different revenues of the stream from wages, interest on savings and dividends from investments. The term encompasses a lot of ways through which a person earns money. Income inequality, on the other hand, is the gap in income that exists in income distribution among the people. A simpler explanation is the difference in income that exists between the highest paid and the lowest paid employee. It is an issue that is facing most developed and even developing nations. The question, therefore, becomes whether it is the responsibility of the society to speak out against and do something to combat the discrepancy in income that exists between the people. The following essay highlights the dangers of income disparity and what can be done to reduce it.
The opinions of income inequality differ significantly. Whereas others see it as a norm, others view it as the biggest problem that afflicts an economy. The fact is that for any economy to prosper, the wage gap should be as low as possible. An increase in economic growth allows the government to provide some services that would ordinarily be too expensive. The rise in economic growth also means that the government can collect more tax as the population spends more. There is a corresponding decrease in poverty. Excessive inequality is considered bad for any economy.

However, because the discrepancy cannot be eliminated entirely, a considerable difference in wages of different people is okay.
Another reason that exists for discouraging inequality is that it has an adverse effect on growth. Although some of the economists have opined that the difference in wage gaps tends to stimulate the economy and consequently trigger growthCITATION Agh98 p 11 l 1033 (Aghion and William 11). It is the right of the government to regulate how much people earn for the public interest. It does this in an attempt to balance the amount of money that is earned by some quarters. To paint a picture of just how dire the situation is, a study in 2014 found that the wealth of the 400 richest people in America is equivalent to that of over 150 million Americans. Any company Chief Executive Officer (CEO) earns over 200 times what the average worker does. This represents an increase of over 1000% since the 1960s. Further, the top 10 richest people made over 50 % of the income of the country. If these statistics do not paint a grim picture of just how bad the wage gap is, then nothing will. Those who are at the lower end of the wage gap will find it impossible to maintain a proper standard of living.
Those who are earning excessively large salaries do so at the expense of almost everyone else. Although there has been an increase in productivity by about 120% over the last fifty years or so, about 99% of the population has not enjoyed the benefits of such increased productivityCITATION Rem14 p n.p l 1033 (Remer n.p). There is a set minimum wage of about 7.25 dollars an hour, but there is no set maximum on what one should earn. If this salary had increased according to the rising inflation and current economic trends, it would be set at more than $14 more at about $21.72. There is a lower social mobility of income, and this translates to low wages for a majority of the population while the higher class and very wealthy have a relatively easy time. For most people, such low wages mean surviving on a bare minimum.
Income inequality is an unwelcomed concept for any nation for a myriad of reasons. One such reason is the detraction from democracy and freedom. Those at the lower end of the wage gap become more withdrawn from public activities such as voting. People focus more on making money so that they can eat and do not have time to listen to politicians or attend rallies and vote. It is simply a matter of priorities. It becomes difficult to think when one has not had anything to eat. Another reason why income inequality is frowned upon is its constitution to a failure of the market. Those who make vast amounts of money cannot benefit from having more given to them. Conversely, those who earn less would find any significant increase very beneficial. Any such increments mean that the money has a diminishing marginal utility.
Income inequality tends to undermine trust and health while it has also been known to increase mortality rates. An increased wage gap translates to a decline in the interaction of social classes. Those who earn more tend to confine themselves to extravagant meetings and wealthy golf course. Contrastingly, those who earn less stick together and prefer not to mix with the rich for fear of contempt. They also become anxious at the first sign of lacking money and feel more stressed more often. Unequal societies experience higher rates of violence, more teenage pregnancies and lifestyle problems such as obesity. All this can be attributed to the despair that is experienced in such societies.
There are various solutions that have been propounded for tackling income inequality. The most useful measure would be to increase the minimum wage to about $12 an hour. This will automatically reduce the gap as people will earn more and have the desire to work for longer so that they can have more disposable income. People will have more to use even upon paying taxes which are the biggest consumer of an individual’s income. Another solution would be funding public entities such as hospitals and schools so that people do not have to pay as much as they do for them. The wage gap is as large as it is because individuals who earn less still have to use their income for the same functions as people who make more. Subsidizing such costs will help low-income earners save more and channel it to other purposes such as investments.
In summary, income inequality is one of if not the biggest problem faced by economies. It is known to have adverse effects in a society that include loss of trust, lack of participation in democratic events and a loss of freedom. The solutions that exist to combat income inequality are raising the minimum wage from the current $7.25 to $12, which would drastically reduce the gap. There are also suggestions of channeling more spending into schools and hospitals. This would minimize the amount of money that low-income earners spend on such services and leave more for investments.
Works Cited
BIBLIOGRAPHY Aghion , Philippe and Jeffrey William . Growth, Inequality, and Globalization: Theory, History, and Policy. Cambridge: Cambridge University Press, 1998. Print.
Remer, Scott. Mind the Gap: The Danger of Income Inequality. 27 February 2014. Website. 27 November 2016.