Income Inequality, Poverty and Discrimination.
Part One
The three major aspects to consider whenever discussing Microeconomics are Income equality, poverty and discrimination in the economy of a state. Economy is a key factor to consider in any organization, society and state as it affects the social status of the persons in those areas. Income equality, poverty and discrimination are demerits that face the economy in any setting. Income inequality is the degree to which earnings are unequally distributed to individuals while poverty is situation in which individuals, family, institution and organization lack a way of meeting their day to day needs. Employment discrimination is where the employee decides to quit employment or rather the employer decides to lay off the employee at any point since there is no documented agreement showing the length of the working condition before termination. The three factors will be discussed in this paper in length.
Causes of income equality include; ability, discrimination, preferences and choices, education and training, connections, misfortune, market power and finally unequal distribution of wealth or rather assets. This factors has led to an increase in income equality more so in the twenty first century making it difficult for the developing states to achieve their economic goals. Rising income equality results into lowest quintile making less relative percentage of income than the one experienced before. On the other side, high quintile makes greater relative percentage of income than before (McConnell, 96). Greater income equality comes at the opportunity cost of reduced production and incomes while greater production has opportunity cost of less equal incomes. It is at this point that the aspect of equality-efficiency trade-off comes in.
Poverty is a situation in where individuals, family, institution and organization lack means to meet their basic needs that include food, clothing, shelter and transportation (McConnell, 102). Globally, 148% of the whole population were person’s living in poverty after the United Nations had really tried to reduce the number by giving out loans to the subjects of poverty to at least upgrade their lives. This was made possible through the World Bank and the International Monetary Fund (IMF). Those persons were able to receive the loans and funds through the entitlement programs where all the eligible persons are legally entitled to receive their benefits. Poverty has also been tried to be reduced by partially replacing earnings that have been lost due to retirement, disability and temporary unemployment by creation of special programs.
Employment discrimination practically means employment relationship whereby the employee may be discharged at any time because no documented agreement shows the length of employment and on the other hand the employee might quit the job at any time without liability for breach of contract. In this case not then employee or the employer can go to a court of law filling a case the other party. Court cases between the employee and the employer based on termination of contract are based on whatever the contract in dictates and since in this case we do not have a contract, then there is no case (McConnell, 112). An employment contract is an agreement signed by both the employee and the employer after the employee have read and agreed with the conditions and terms set by the employer and the latter should be in line with the rule of law more so the chapter talking of the employee- employer relationship.
The labor courts came up with an affirmative action plan to remedy past discrimination by bringing the percentages of minorities and women in the workforce up to their corresponding percentages in the pool of quality applicants. ADA is an aspect that hinders employers from engaging in unjustified discrimination against persons based on their disabilities. This can be supported by the fact been disabled does not mean one cannot take part in a job, those persons are just abled in a different and special manner (McConnell, 115) Ones an employee avoids the employment discrimination, the employer may decide to reward him/her through a bona fide seniority system due to the employees long length of employment besides the appreciation for the job well done. A business necessity plays a major role in discrimination in employment as a defense to a treatment employment discrimination case in which an employer’s actions were to advance the business on top of creating discrimination with no facts. Another key factor to consider is disparate impact where the employer decides to treat the other employees in favor forgetting the members of a protected class less leading to elimination of the protected class from the job.
Part 2, Income Inequality
Income inequality also known as income disparity is the intensity to which all earnings are unequally shared in a large group of people. In most situations, great abundance goes to a small percentage of those who are somehow financially stable. In most states people with white collar jobs and good income are often called the ‘one percent’ showing that they represent a small percentage of the entire population whilst owning a large percentage of the country’s wellbeing (Duncan, et al., np). Most people confuse the income inequality wealth inequality. Though both have similar concepts, they have major deviations. Income is how much one earns in a particular financial year both from employment and the annual returns on his/her investments. On the other hand, wealth is one’/s total net worth. Before the coming of World war 11, income disparity greatly rose from wealth disparity since well up families had tangible deals that led to investments which resulted in to great returns at the end of a financial year. In twenty first century things have changed since earnings from labor have taken a great part in matters concerning income disparity.
Income inequality is brought forward by a couple of factors which include; structural, economic and demographic forces. It is important to note that income disparity has really risen at a higher rate over the last half century unlike there before (Taylor et.al., np). Digging deep down to the three factors mentioned above, here are the specific factors that drives income inequality: Tax policy, unemployment, increased automation, globalization, and decline of unions, salary gaps and Race / gender disparities.
Tax policy is a key aspect to consider when looking into a country’s economy with tax structures that increase the economic growth in the short term while supporting increased government revenue in the long term connected to the lowest instances of income inequality (Engen, et.al., np). Second, globalization is another factor that means sourcing of employers from other states based on education and experience instead of employing persons with low levels of education and experience in the name of them been citizens of that particular state. A good example of a country that has practiced globalization is the United State of America. Third, Unemployment is another great factor which plays a major role in increasing income inequality since it lowers the inclusivity of the task of labor. Economists reason that inequality results also from the increased price of house units and lack of ability of employers to relocate to towns and cities with high job growth rate. Fourth, increased automation as a result of the fast-growing technology resulting in to laying off of some members of the blue-collar jobs.
Increased automation even leads to decline the wages and in some states holding the wages stagnant for a long period of time. Fifth, talking race/ gender disparities, women and persons of color get to discriminated in employment. In a country like the United States you find that males get to earn 68 percent more than their female colleagues were also a large percentage of these men are the white men. Sixth, Salary gaps is factor that has also greatly contributed to the income inequality (Engen, et.al., np). In most cases college educated workers and those at the top executives have experienced their salaries being doubled and other even tripled while those of the high school and diploma have seen little growth or no growth at all in their salaries. It is from these wide pay gaps that income disparity results from.
Part 3
Income disparity has also resulted into effects more so economic related effects. These effects include; political polarization, decreased social mobility and stymied economic growth (Henderson, et.al., np). Political polarization gets to rise as inequality rise. Second, stymied economic growth tend to reduce the economic growth due to the fact most persons make less money resulting to them spare less money to spend. Third, those in lower income get to be subjects of decreased social mobility whenever there is an income inequality. According to the report by OECD, the major route through which disparity affects development rate is by taking lightly education chances for the less aged in the poor socioeconomic societies, thus lowering social mobility and hindering skills and talents development.
A good example of the interrelation between income disparity and fall in economy is the Great Recession of 2008 showing how income inequality has a big effect to a state. In America, in the early 2000s both the working and the middle class became stagnant resulting to a rise in need of credit (Bugajewski, et.al., np). This led to bank regulations being altered leading to the development of the wealth class by two percent creating a very weak state making the economy to deteriorate forcing America into the Great Recession. From my look into this Great Recession, it is crystal clear that it concentrated in the housing market making the middle class to be left with nothing valuable other than their homes. This Recession hit the middle class harder than any other class. This was a messy tackle to middle class since up to date they have never recovered from the mess despite the initiative of the federal reserve to cut interest rates and creating many other channels for the Americans to access loans and funds.
At a personal level, income inequality has affected both my family and the people around me and from this I have gathered that income inequality is a factor that largely impacts the economy of a nation. Most of my friends are educated to the level of an undergraduate, the government is finding it better to source out professionals from other states since those foreigners have gone a notch higher in their education level, example; postgraduates’ foreigners. This has left most of my friends jobless, thus having to endure income inequality. Economist have tried to come up with possible ways both theoretically and practically to solve this menace of income inequality. This had to begin with the realization that income disparity is key to a country’s economy and social state (Taylor, et al., np). Some of the solutions include; introducing mechanisms to enhance an increase in the minimum salary so as to in return to increase the national average income. Second, restructure taxes such as by redistributing the taxes accordingly. Third, strengthen unions for reasons such as wage compression thus reducing inequality. Fourth, improve state and federal initiatives hence social safety agencies like those of security and medical carrying the burden of most employers.
In conclusion, in order to lower or rather do away with income disparity, Universal health care and nutrition assistance are aspects to be considered in improving the lives of poor children thus reducing disparity. More so, fiscal policies meant to reduce gaps can also lead to everlasting equality.
Works Cited
Bugajewski, Dariusz, and Piotr Maćkowiak. "On knife-edge conditions with unbounded growth." Journal of Macroeconomics 45 (2015): 274-283.
Duncan, Greg J., and Richard J. Murnane. "Growing income inequality threatens American education." Phi Delta Kappan 95.6 (2014): 8-14.
Engen, Eric M., and Jonathan Skinner. Taxation and economic growth. No. w5826. National Bureau of Economic Research, 1996.
Henderson, Daniel J., Junhui Qian, and Le Wang. "The inequality–growth plateau." Economics Letters 128 (2015): 17-20. volume 128, 2015, pp. 18
McConnell, Campbell R, Stanley L. Brue, and Sean M. Flynn. Microeconomics: Principles,
Problems, and Policies. , 2015. Print.
Taylor, Lance, et al. "Wage increases, transfers, and the socially determined income distribution in the USA." Review of Keynesian Economics 5.2 (2017): 259-275.
