Economic Justice: The Need for Equal Opportunities
Economic justice is a passionate topic among people of all spheres of life. It seeks to have equal opportunities for all in the creation and distribution of wealth. There are multiple factors leading to the disparities between the rich and the poor. In addition to leading some in living undignified lives, it has a direct negative impact on the economy of a country. When the resources are in the hands of a few, then the majority lack the capacity to generate wealth. Development is then hampered and the levels of poverty rise. Despite the awareness of the issue, there is little being done to correct the wrongs. As a result, the gap between the rich and the poor continues to rise and has reached record levels. The current project seeks to research on wealth gap so as to make recommendations on changes which may bring equality.
Statistical Representation
According to the Pew research centre, the average wealth of the upper income families was $639,400 while that of the middle income families was $96,500 in 2013 (Fry and Kochhar 1). The figure translates to about 6.6 times which is quite significant. Further, the wealth of the upper income group is almost 70 times that of the lower income group. The great recession of 2007-2008 affected all the three income groups negatively. However, the lower income group was the hardest hit where there was 415 reductions in wealth as compared to 17% for the upper income group. The middle income group also felt the pinch with a reduction of about 39% (Fry and Kochhar 1). It is only the upper income group that has begun recovery after the great recession where the average wealth was $595,300 in 2010 but has risen to $639,400 in 2013. That of the other income groups has remained stagnant over the same period. There is also racial attachment to the distribution of wealth where the whites control most of it. In 2016, the average wealth of a white family was up to ten times that of the black family. In the same period, the same while the family had wealth about eight times that of the Hispanic family. The upper income families also have high earnings from private incomes such as earnings from shares and dividends. The Urban Institute reports that the upper income families were a rise from such earnings by about 90% between 1963 and 2016. The same report indicates that the lower income families only saw a rise in 10% over the same period. In 2017, the US government spent $400 billion to support asset development. However, the main benefactors of the policy are the upper income families. In fact, the bottom 20% of the lower income families only benefited with 1% of this subsidy.
Factors Leading to the Gap
The argument that among the main factors that lead to great disparities in wealth is financial literacy has been around for a while. In fact, it is the explanation put forward for the low levels of wealth and income among the African Americans and the Hispanics. However, it is far from the truth. All sections of the population make financial decisions based on the resources at their disposal. Financial policies are a major contribution to the widening wealth gap (Dabla-Norris et al. 8). Despite the presence of Federal policies which are meant to increase wealth among the people, the gap keeps on widening. Almost the whole of the $400 billion spent in the 2016-2017 fiscal year for the same purpose went to those in the upper income percentile. In fact, only 1% of the same went to the lower income. Such poor policies have only worked to make the rich richer.
The Money System and Access to Credit
Another factor attributed to an increase in the gap is the money system in the country (Izurieta, Alex, Pierre Kohler, and Juan, 7). The absence of proper policies in the money lending system has led to what is known as predatory lenders. The lenders use dubious means targeting the lower income families to trap them into debt. Once they are in, it becomes a cycle where one is permanently in debt to the lenders (DiMuzio and ROAR Magazine 1). Ultimately, any growth in wealth becomes quite difficult. At the same time, the lenders easily attach any assets that the lower income families have in case of a default thus making them poorer.
Access to affordable credit is another major factor that works against lower income families. It is worth noting that race is important in wealth distribution. As noted earlier, the whites lead in the number of those in the upper income while the African Americans lead in those of the lower income bracket. It is easy for the white families to have access to unsecured loans as compared to other sections of the population. Hamilton and William 62 report that 47% of the white families stated that they had access to unsecured loans as compared to the 42% of the African American families. They further explain that most of the debt acquisition is meant for school and other critical needs including health. Therefore, the money goes into non-income generating activities thus trapping the families into debt.
The Education System and its Impact
The education system is another factor that has led to an increase in the wealth gap. The public schools are run by city and town authorities and are funded by property taxes. The wealth among the districts is not even. In turn, the funding for public schools in the wealthy districts is sufficient, and the children have access to the best quality education (Mitchell, Vincent Palacios, and Michael, 71). In comparison, the poor districts have difficulty funding public schools as property taxes are equally low. Therefore, the level of education for the poor remains low. Subsequently, it becomes difficult to access institutions of higher learning, and the levels of skill remain low among the poor. When they get to labor, the compensation is equally low thus continuing with the poverty cycle. It is also common to have the students from poor backgrounds drop out of school due to financial difficulties. As a result, poverty elevation through education becomes a mirage for many. The National Bureau of Economic Research, a 20% increase in spending on per pupil education can help to increase their earnings by up to 25% when they are done with their education. Despite such information, there is little evidence that anything is being done to address the issue. On the other hand, it is easy for students from wealthy families to complete education and graduate with the right skills. They then proceed to rise up their career ladders with a stable income and thus a growth in wealth.
Measures to Bridge the Gap
In cognizant of the many available streams of earnings for the wealthy, it is necessary to draft policies geared towards uplifting the poor out of their situations. The asset development subsidy should get directed to those in the lower and middle-income brackets as a way of reducing the gap. Eventually, it will help the poor increase the amounts of assets they have which are vital in the securing of loans thus leading to growth.
It is also necessary to enact policies that will protect the poor against getting trapped into debt. Regulation on lenders and the interests they charge is a necessary step to curb the entrapment of the poor. Similarly, harmonization of laws which allow access to credit for all on an equal basis will help those in the lower-income bracket to access credit, which is a necessary ingredient for growth.
It is also necessary to revise the funding of public schools to enhance equality. As it is now, the poor districts have very inadequate education facilities which have serious implications on the education of poor kids. Federal funding of education is also very low, which leaves them at the mercy of the local property houses which are insufficient in some districts. As a remedial action, the funding of public schools should be entrusted to the federal government, which will have some level of uniformity throughout the country (Mitchell, Vincent Palacios, and Michael, 71). Further, there should be a policy which protects the students from dropping out due to financial issues. The setting up of a revolving fund, which would help to cater to the education needs of those in the lower-income bracket, is a good start towards bridging the wealth gap (Rogers, D., and Bálint Balázs,17).
Conclusion
The policies in place have been a major contribution to the gap between the rich and the poor. Although there are concerns about the distribution of wealth, it is only a change in the approach which will reduce the same.
List of Source Citations with Annotations
Dabla-Norris, Ms Era, et al. Causes and consequences of income inequality: a global perspective. International Monetary Fund, 2015.
The article is a presents an in-depth analysis of the causes and outcomes of income inequality with regard to macroeconomics. The article first outlines the factors that people should be aware of regarding the consequences of wealth inequality and why people should care. The factors are that inequality impedes social mobility, it shows a lack of income mobility, and has implications on macroeconomic stability and growth. The article brings another dynamic into the discussion by highlighting the consequences of inequality in the context of unequal outcomes and opportunities. The authors then discuss, with evidence, the factors driving the high income inequality, one of which is the squeezing of the middle class. The article has internal and external validity since the discussions can be applicable to any economy in the world. The credibility is shown in the use of statistical evidence to back up the claims.
DiMuzio, Tim, and ROAR Magazine. "The Life And Times Of The 1%." Truthout. N.p., 2016. Web. 25 Oct. 2018.
The article explicitly defines the 1%, explains their accumulation of wealth, and finally explains the extreme income disparity between the 1% and the rest of the people in the economic pyramid. The 1% are "high-net worth individuals" with a minimum of $1 million (USD) invested in assets that generate income, namely, real estates, government bonds, and corporate shares. The 1% accumulates wealth by owning multiple income streams and having power (sometimes political). The huge disparity is contributed by the money system that issues loans to those who have amassed wealth as compared to those who have not. They, in turn, invest in capital markets and make more wealth at the expense of others. The validity of the market is guaranteed since the evidence presented is applicable to all economies in the globe. The credibility of the article is also guaranteed given the use of evidence that can be confirmed given that the article focuses on economy and labor. The presentation also clearly puts a trail on the life of the 1% in earning their wealth and increasing wealth disparity.
Fry, Richard, and Rakesh Kochhar. "America's Wealth Gap Between Middle-Income And Upper-Income Families Is Widest On Record | Pew Research Center." Pew Research Center. N.p., 2014. Web. 25 Oct. 2018.
The article specifically focuses on the statistical evidence available on the wealth difference between the upper-income and middle-income families in the United States. The purpose aligns with our research question of highlighting the statistical representation of the wealth gap. The article presents evidence on the changes that have occurred on the median net worth of upper-income families compared to middle-income families from 1983 to 2013. The statistics show a gradual increase in the net worth of the upper-income families comparative to middle-income families with a high record from 2004 to 2013. It also shows the proportion of middle-income and upper-income families and the changes that have occurred over the years. The article then outlines the statistics on the wealth gains recorded over the years. The statistical figures and charts make the article credible in backing the claims made. However, its external validity is not guaranteed since the data presented is only for the United States.
Hamilton, Darrick, and William A. Darity. "The political economy of education, financial literacy, and the racial wealth gap." (2017)
The authors of the article present a different set of arguments as to why there is a large gap in the distribution of wealth. There is a start where they state some of the conventional reasons as to why the gap exists, which is then challenged with both logical arguments and statistical backing. The authors have stated that for a long time, financial literacy has been attributed to the gap in wealth distribution. They further state that the proponents of the idea have ignored other factors and thus given the wrong impression. They acknowledge the existence of large gaps in wealth distribution based along race, which they state cannot be based on financial literacy alone. There are other factors such as access to loans and the availability of assets to secure such loans. The statistics presented show that the white population has easy access to unsecured loans, although they also control the most assets. The authors have also pointed at education, with African Americans being the most who fail to graduate to the lack of finances.
Mitchell, Michael, Vincent Palacios, and Michael Leachman. "States are still funding higher education below pre-recession levels." Journal of Collective Bargaining in the Academy 10 (2015): 71.
The article is relevant as it traces the changes in the education of the country to a time when the wealth gap began to widen. It traces the difference in wages to the education system where the rich can easily afford expensive private schools, while the others can move to homes in wealthy districts where the schools have all the necessary facilities. Written in 2014, it highlights the importance of having equal educational opportunities for the purpose of ensuring a continuity in the economy of the country. The article argues that when the children of the rich get access to the best education, and they easily book spots in the best colleges, the wealth distribution can only widen. The information in the article is backed by research done by students on graduating students of both high and low-income families. Additionally, it quotes reliable sources about the topic, thus giving credibility to the claims.
Izurieta, Alex, Pierre Kohler, and Juan Pizarro. "Financialization, Trade, and Investment Agreements: Through the Looking Glass or Through the Realities of Income Distribution and Government Policy?." (2018).
The article is on the financialization of trade and investment amongst countries in the world. Among the factors named to be hampering the process include income distribution in many parts of the world. The paper details the period known as the super bubble when there was a revolution in the world stocks. It also describes the same period as a super crisis due to the changes there was in the income distribution. The paper describes finance as the main source of the inequalities that exist in pay structures. There is also globalization which is demonstrated to be increasing the income inequality. Both globalization and finance are subject to policy control and governments are not helpless according to the article. On globalization, the paper explains the export of jobs from the United States to China, thus increasing levels of unemployment. However, the paper is general and addresses many countries of the world.
Rogers, D., and Bálint Balázs. "The view from deprivation: Poverty, inequality, and the distribution of wealth." Poverty and the millennium development goals: A critical look forward(2016): 45-82.
The article addresses income inequality on a global level with a special focus on India. Despite the paper specializing in a certain economy, it states that the problem is universal and the tendencies are almost always the same. It names several causes of the inequality which are from a survey among the poor. The paper then argues that those who have the most to lose, who are the poor in this case also have the least influence on policy. The involvement of the people in the lower-income bracket in the enactment of policy is one of the suggestions made by the paper. It argues that the concerned have the ideas and the solutions to their problems. As a result, it is necessary to have them participate in finding solutions to the problem.
Work cited
Dabla-Norris, Ms Era, et al. Causes and consequences of income inequality: a global perspective. International Monetary Fund, 2015.
DiMuzio, Tim, and ROAR Magazine. "The Life And Times Of The 1%." Truthout. N.p., 2016. Web. 25 Oct. 2018.
Fry, Richard, and Rakesh Kochhar. "America's Wealth Gap Between Middle-Income And Upper-Income Families Is Widest On Record | Pew Research Center." Pew Research Center. N.p., 2014. Web. 25 Oct. 2018.
Hamilton, Darrick, and William A. Darity. "The political economy of education, financial literacy, and the racial wealth gap." (2017)
Izurieta, Alex, Pierre Kohler, and Juan Pizarro. "Financialization, Trade, and Investment Agreements: Through the Looking Glass or Through the Realities of Income Distribution and Government Policy?." (2018).
Mitchell, Michael, Vincent Palacios, and Michael Leachman. "States are still funding higher education below pre-recession levels." Journal of Collective Bargaining in the Academy 10 (2015): 71.
Rogers, D., and Bálint Balázs. "The view from deprivation: Poverty, inequality, and the distribution of wealth." Poverty and the millennium development goals: A critical look forward(2016): 45-82.
