Wealth & Income Equality:Injustice for allUniversity of BuffaloBrandy Loveland

The Problem: Wealth & Income Inequality

Economic Inequality is the highest that is has been since 1928. Income inequality refers to the extent to which income is distributed in an

uneven manner among a population and is defined as the gap between the rich and the remainder of society. (inequality.org).

Politizane (2012, November 20). Wealth Inequality in America. Retrieved from https://www.youtube.com/watch?v=QPKKQnijnsM

The Problem: Wealth & Income Inequality

Women and men are making less today than in 1999, after inflation. The median family income has also significantly decreased since then. (Sanders,2015)

*See where you stand at inequality.is

Sanders, B. (2015). Bernie Sanders on Economic Inequality. Retrieved from http://feelthebern.org/bernie-sanders-on-economic-inequality/

How did this happen?

1979

Prior to 1979, worker compensation and productivity rose at the same rate. After 1979, compensation began to increasingly lag as productivity rose.

Mishel, L., Bivens, J., Gould, E. & Shierholz, H. (2012). The State of Working America: An Economic Policy Institute Book. Ithica: Cornell University PressBureau of Labor Statistics (2015). Current population ongoing rotation group microdata [machine readable microdata file]. Washington, D.C. : U.S. Census Bureau

How did this happen?

Labor movement 1930’s-1950’s

Civil Rights Movement1950’s-1960’s

Women’s Movement1960’s-1970’s

Environmental Movement1960’s-1970’s

Consumer Movement1960-1970’s

Led Corporations from 1930-1970’s to:

Increase wage and benefits for union and non union workers

Prohibit companies from paying women and minorities less than white men

Constrain U.S. businesses that endanger the environment and consumers

Prohibited market discrimination Ensured consumer product safety Guaranteed workers health and safety Made union creation easier This ultimately narrowed the wage gap

(Schmitt, 2009)

How did this happen?

But in the late 1970’s policy decisions on the following issues shifted economic power away from the low and the middle class.

How did this happen?

Two oil crises of the 1970’s

Political shift towards employer interests

Corporate Backlash

Economic crisis of the 1970’s

Policy InitiativesObjective: “Increase

Efficiency” Inflation-adjusted value of minimum wage

Deregulation of airline, trucking, railway, financial and telecommunications industries

Liberalization of foreign trade through trade agreements (globalization)

Privatization of federal, local, and state government functions (ie. Welfare policies)

The U.S. war in Iraq and Afghanistan

Policies that enabled the deterioration of unionization in the

private sector (Schmitt, 2009)

How did this happen?

As a result, in the United States, wealth and income inequality ,has been growing markedly, by every major statistical measure, for some 30 years. In Fact, the U.S. has the highest inequality of all developed countries, only above Turkey, Mexico, and Chile.

OECD (2015), Income inequality (indicator). doi: 10.1787/459aa7f1-en (Accessed on 15 October 2015)

Why does this matter?

Research has proven that income inequality is correlated with health and social problems…

Wilkinson, R & Pickett, K. (2011). Greater quality: The hidden key to better health and higher scores. American Educator, Spring, 5-9

Why does this matter?Recently, President Obama stated income inequality as the “defining challenge of our time” and social patterns that contribute to a decline in mobility is now everywhere.

Why does this matter?

Even though research suggests that economic inequality may pose a threat to societal well being…*71% of Americans feel that the poor can escape poverty, due to their faith in the “American Dream (Davidai & Gilovich, 2015). Also many politicians, especially Republican politicians, back this idea.

"There is income inequality in America. There always has been and hopefully, and I do say that, there always will be. "Why? Because people rise to different levels of success based on what they contribute to society and to the marketplace, and that's as it should be.“- Senator Rick Santorum (Ellyat, 2013)

Why does this matter?

Many also believe in “Trickle Down Economics” or “Supply Side Economics,” a theory made popular in the 1980’s during President Regan’s term in office, that has been used for over three decades. This theory states that if enough money is given to the rich, some with will trickle down to the poor. This form of economics, however, not only has contributed to inequality, but economic inefficiency, and reduced growth and stability (Howell, 2013).

Why does this matter?

In the Congressional Budget Office Long-Term 2013 report, if wealth and income inequality continues, top 10% percentile will see a $63,000 increase in wealth, while the 90% will see a $18,000 decrease by 2035 (Schwabish & Topoleski, 2013).

Schwabish & Topoleski. (2013). Modeling Individual Earnings in CBO’s Long-Term Microsimulation Model. (June). Washington, D.C.

Why does this matter?This increase in inequality will bring several more Americans below poverty level and lead to increasing social concerns across the county, and causing adverse bio-psycho-social effects.

Attempts to Battle InequalityOn June 4, 1963, President Kennedy signed Executive Order 11110 that would return power to the U.S. government to issue currency without going through the Federal Reserve, which is a private entity. This would have allowed the country to pay off it’s national debt, which would have: Lowered Cost of Living Increased wage growth Helped to prevent generational

inequality Prevented fiscal crisis (Peters &

Woodley ,1963)He was assassinated five months later and the 4.3 billion in government bills were destroyed when Lyndon Johnson came into office. The order is still valid, but no other President has used the order since.

Attempts to Battle InequalitySeveral movements and advocacy groups, like Wealth for the Common Good, have also been created since to fight inequality in the United States, but none have been as effective or as visible as the following:

Kshama Sawant, Socialist Member of the Seattle City Council, started the Now 15 Coalition, which has won a $15.oo minimum wage in Seattle and sparked the current National Fight for $15 movement (Abramsky, 2014). It also appears to be shaping the 2016election and influencing major retailers like Gap, who raised their minimum wage last year.

Occupy started in 2011 as a movement protesting capitalism, and became a movement to fight societal structures, especially wealth and income inequality (Pickerill & Krinsky, 2012). It has since disbanded, but shaped the 2012 presidential election and made visible the United State’s

inequality to the world. It also demystified the notion that the poor choose to be poor and brought to light societal barriers.

Attempts to Battle InequalityAlso, in his 2015 State of the Union Address, President Obama, due to the seriousness of economic equality, called for Congress to “make community college free for most students, enhance tax credits for education and child care, and impose new taxes and fees on high-income earners and large financial institutions (Spear & Davis, January 20, 2015).”

“Will we accept an economy where only a few of us do spectacularly well? Or will we commit ourselves to an economy that generates rising incomes and chances for everyone who makes the effort?”- President Barack Obama (State of the Union, 2015)

Policy Interventions

This Policy Intervention would work to do the following: Build Social and Human

Capital Increase Economic Security Build Income By Tackling the Following: Change Global Trade Agreements and Change Labor Standards

Change Wage Standards and Increase Income

Create A Proactive Welfare State

Restructure Financial Regulation

Education Reform Job Creation

Policy InterventionsTrade Policies and Labor Standards:Policies, such as the North American Free Trade Agreement (NAFTA), allowed companies to outsource factory production to other countries, causing the loss of several jobs (Armenter, 2015). New policies should be made, and old amended, to address unequal levels of development, enforcement of labor rights (especially the right to unionize), and environmental standards (Scott, 2003) Also, incentives should be given to employers who invest in free skills that promote worker upward mobility (OECD, 2014).

Change Wage Standards and Increase Income:Currently the national minimum wage is $7.25/hour (DOL,2015). This is not a livable wage. Furthermore, gender inequality still exists in the work sector, with women making $0.78 to every dollar at man makes. The national minimum wage should be at least $15.00/hour and be adjusted regionally, by a formula based on average cost of living in that area. Also all genders should receive equal pay.

Policy InterventionsCreate a Proactive Welfare State:Shift saving incentives from tax policies to refundable tax credits to provide equal benefits and enhance Earned Income Tax Credits (HAAS Institute,2014). Trade policies, ie. Unemployment Insurance, needs to be more accessible (OECD, 2014). Reactive and flawed welfare services for the poor, ie. Welfare to Work, have contributed to the amount of people in the safety net (Kreifall & Dunlea, 2011). These policies need to be proactive. Government needs to shift from the privatization on local and state government functions. Policies need to provide wide and equal access to high-quality public services, and jail reform.

Financial Regulation:The deregulation of banks allowed banks ultimately led to them taking risks that brought about the 2008 Emergency Economic Stabilization Act, where the American taypayers bailed out the banks. Executive Order 11110 needs to be enacted and banks need to be regulated to prevent the possibility of future bailouts.

Policy Interventions

Education ReformAccording to Arne Duncan, Secretary of Education, better education is essential as it will provide disadvantage students the tools to increase future incomes and increase social mobility (OECD, 2014). Comprehensive reform should be created to promote the teaching field, restructure schools, provide college accessibility and invest in early childhood. Training programs should also be offered as an alternative to college (Heckman, 2000). It should also be structured eliminate the school to prison pipeline.

Job CreationInvesting in Infrastructure could be used as a job creation tool and could create 18,000 jobs for every $1 billion in new investment spending, through the construction and manufacturing sector (Heints, Pollin, & Garrett-Pettier, 2009).

Possible Opposing Arguments

Some may consider that it will cost too much Providing these options will be seen an “handout” at the tax payer’s expense

This would be considered a very leftist, socialist approach.

Will lose corporations as they will move to other countries for cheaper labor

Politicians will not agree to this plan Corporate Backlash will occur again Many argue that some people, especially those that work in service fields or who receive public assistance, do not deserve $15.00 minimum wage

Implications and CommunicationThe solution would be implemented in the next three to five years through Congress and the President of the United States., who would need to approve of the aforementioned policy creation and reform. The process to reach the solution will take longer. Below are the key steps for this.

Key Steps: Partnering with coalitions to

collaborate and organize a movement for addressing the issue

Meeting with local leaders, businesses, unions, and organizations for support

Educating the community on the severity of the issue

Including community response and input in plan creation

Creation and delegations of committees for tasks (i.e. writing letters to the editor, media communications)

Lobbying politicians for support Policy Drafting

Timeframes: Partnering and collaboration

should be implemented in the first six months.

Community education and meetings should be an ongoing process

Plan creation should occur within the first six months, as well as committee creation

Committee task should begin one month after creation

Policy Drafting should be discussed in the first ten months

Outcome

If this plan is successful, here are a few outcomes the United States would see: A decrease in people in the safety net An increase in employment A larger population that is able to save and invest Less criminal recidivism Increased benefits and rights for union and non union employees Better working conditions and pay Improved neighborhood conditions Less infant mortality due to better maternity/paternity leave policies More economic mobility Less child poverty and homelessness A dramatic decrease in wealth and economic equality An increase in trust in government

References

Abramsky, S. ( April 28, 2014). Fearless in Seattle. The Nation. Retrieved from http://www.thenation.com/article/what-if-minimum-wage-were-15-hour/

Armenter, R. (2015). A bit of a miracle no more: The decline of the labor share [Business Review]. Philadelphia Federal Reserve. Philadelphia

Bureau of Labor Statistics (2015). Current population ongoing rotation group microdata [machine readable microdata file]. Washington, D.C. : U.S. Census Bureau

Davidai S. & Gilovich, T. (2015). Building a mobile America-One income quintile at a time. Perspectives on Psychological Science, 10 (1), 60-71. DOI:10.1177/1745691614562005

Ellyatt, H. (8 Jan, 2013). Income Inequality: Is It Good For Everyone?. CNBC News. Retrieved from http://www.cnbc.com/id/100361302

Haas Institute. (2014). Responding to rising inequality: Policy interventions to ensure opportunity for all [Policy Brief]. Haas Institute for Fair and Inclusive Society. Berkley

Heckman, J. (2000). Policies to foster human capital. Research in Economics, 54, 3-56. Doi: 10.1006/reec.1999.0225

Heints, J. , Pollin, R., , & Garrett-Pettier, H. (2009). How Infrastructure Investments Support the U.S. Economy: Employment, Productivity, and Growth. Political Economy Research Institiute. Massachusetts

Howell, D. (2013) The great American laissez-faire experiment: Post-1980 inequality and growth in international perspective. Center for American Progress. Washington, D. C.

Inequality.us (2015). Economic inequality definition. Retrieved from http://inequality.is/real

Kriefall, A. & Dunlea, M. (2011). Making new roads from Welfare to Work: Ramping up unsubsidized employment and community jobs programs in New York State. Hunger Action Network of New York State. Albany

Linden, M. (2012). The federal tax code and income inequality: How federal tax policy changes have affected and will affect income inequality. Center for American Progress. Washington, D.C.

Mishel, L., Bivens, J., Gould, E. & Shierholz, H. (2012). The State of Working America: An Economic Policy Institute Book. Ithaca: Cornell University Press

OECD (2015), Income inequality (indicator). doi: 10.1787/459aa7f1-en (Accessed on 15 October 2015)

References

OECD. (2014). United States: Tackling high inequalities creating opportunities for all. Paris: OCED Publishing

Peters, G. & Woolley, J. (2015). John F. Kennedy: "Executive Order 11110 - Amendment of Executive Order No. 10289 as Amended, Relating to the Performance of Certain Functions Affecting the Department of the Treasury," June 4, 1963.   The American Presidency Project. Retrieved from http://www.presidency.ucsb.edu/ws/?pid=59049

Pickerill, J. & Krinsky, J. (2012). Why does occupy matter? Social Movement Studies, (11) 3-4, 279-287

Politizane (2012, November 20). Wealth Inequality in America. Retrieved from https://www.youtube.com/watch?v=QPKKQnijnsM

Sanders, B. (2015). Bernie Sanders on Economic Inequality. Retrieved from http://feelthebern.org/bernie-sanders-on-economic-inequality/

Schwabish & Topoleski. (2013). Modeling Individual Earnings in CBO’s Long-Term Microsimulation Model. (June). Washington, D.C.

Schmitt, J. (2009). Inequality as policy: The United States since 1979. Center for Economic and Policy Research. Washington, D.C.

Scott, R. (2003). The high price of ‘free’ trade: NAFTA’s failure has cost the United States jobs across the nation. Economic Policy Institute [Briefing Paper} Washington

Spear & Davis, January 20, 2015 . In the State of the Union, Obama Sets an Ambitious Agenda. New York Times. Retrieved from http://www.nytimes.com/2015/01/21/us/state-of-the-union-obama-ambitious-agenda-to-help-middle-class.html?_r=0

State of the Union Address (2015). Retrieved from http://www.nytimes.com/2015/01/21/us/politics/obamas-state-of-the-union-2015-address.html?action=click&contentCollection=U.S.&module=RelatedCoverage&region=Marginalia&pgtype=article

United States Department of Labor. (2015). Wages: Minimum wage. Retrieved from http://www.dol.gov/dol/topic/wages/minimumwage.htm

Wilkinson, R & Pickett, K. (2011). Greater quality: The hidden key to better health and higher scores. American Educator, Spring, 5-9