Income Inequality in America

According to Chris Hicke, the biggest issue in the country is a symptom of cultural trends. 

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One of the biggest issues in the country, at least since the ’08 financial collapse, is the growing trend of wealth inequality in America. While this issue has arguably been going on for decades, it didn’t become a serious part of national discourse until Occupy Wall Street brought the wealth gap between the wealthiest citizens, the so-called “1%”, and the rest of us, the so-called “99%”. While the issue here is that the top 20% of income earners in the United States own the vast majority of wealth and income in the country, this is merely part of a problem that’s been building up for quite some time.

The most obvious effect of the Great Recession was the mass layoffs and subsequent unemployment following the collapse of the stock market, which had cascading negative effects on both the US and the world. Many lost well-paying jobs, and were forced to take entry level, minimum wage jobs to get by. These jobs are often insufficient, especially for those who have families to feed, as most low skill jobs are part time at best, and many companies, such as Wal-Mart, expect their employees to be available to work 24/7 (TK), while providing few employees with full-time work. This has led to state and federal welfare systems picking up the slack, which has become a drain on the nation as a whole.

College students were hit particularly hard. As most students lack the skills needed for well-paying jobs, they are nearly dependent on retail, food service, and other low-skill employment to get by. Since these positions have been increasingly filled by the aforementioned laid off workers, or laden with absurd experience requirements and automated application screening, college students have had a particularly hard time in the job market since the ’08 collapse. They have moved back home in record numbers, and lived at home longer, due to these financial difficulties, which hasn’t been helped by crippling student loan debt, which comes in at over $1 Trillion dollars, and currently tops credit card debt.

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While official unemployment numbers have dropped to 7.2% from its 10% peak in 2010, the unofficial number hovers closer to 14%. This number accounts for people who only work part time (30hrs/wk or less), or who have given up the job search altogether. These numbers have not been helped by the Affordable Care Act (Obamacare), as one if its provisions require businesses with 50 or more employees to provide health insurance to anyone working 30 or more hours per week. Though this provision doesn’t take effect until 2015, many businesses have decided to address this requirement by cutting their employees’ hours to 29/wk or less to avoid paying for health insurance. Therefore, many part time workers will be seeing not only increased expenditures from being legally required to purchase health care, they will be seeing less wages as their hours are cut.

Coupled to this is the somewhat more recent discussion about raising the minimum wage. Employees of fast food chains such as McDonald’s, and superstore Wal-Mart, have begun calling for a minimum wage increase to $15/hr, as the current federal rate of $7.25/hr is insufficient to make a living on. While opponents of this movement argue that the overall cost of doubling the minimum wage will be offset by the rising price of everything else to offset this seemingly drastic wage increase, this argument fails to address a couple of key points that are often overlooked. The first is that, in order to keep up with inflation alone, the minimum wage would need to be increased to $10.52/hr. San Francisco was the first city to increase the local minimum wage to $10.55/hr, as part of an initiative tying local minimum wage to inflation, giving it the highest minimum wage in the nation. The entire state of California is set to follow in San Francisco’s footsteps by raising the state minimum wage to $10/hr by 2016, which will give the state the highest minimum wage in the nation.

The second point to be made is that, had minimum wage kept pace with productivity since 1968, it would currently stand at $21.72/hr. This is where the argument gets tricky. On one hand, raising the minimum wage, regardless of how much, would likely result in increased wages for other, already higher-paid workers. Everyone’s wages would increase as a side effect, and the average worker would find themselves with considerably more money to pay their bills and spend on leisure. That last part is what would get the economy going, as increased spending power turns into increased profit margins, which, leads to the investments and expansions that keeps the machine going. Or so the theory goes.

The counter-argument to this is that increased wages, especially the higher rate of $21.72, would lead to the costs of everything increasing to compensate. This line of thinking states that such increases would effectively nullify any progress made for workers who saw such a wage increase. Additionally, many businesses would lay off employees to compensate, while others would go under as they find themselves unable to pay their expenses and turn a profit. These are certainly outcomes that must be considered, though it is worth noting that lower customer salaries means fewer sales on consumer goods, which does not help the situation.

It’s generally about this point in the discussion that someone invariably says that anyone looking for a better paying job should get an education. It is true that a better education, be it as a college degree or trade skill, will lead to better work opportunities. However, when someone has to worry about raising and feeding their children, the time, energy, and money required to obtain a higher education can be prohibitive. As it stands, tuition rates have increased by over 1,100% since 1978, outpacing inflation and wage increases by far. Financial aid programs, such as Pell grants, are insufficient to make up the difference, placing a quality education out of the reach of many. As it stands, student loan debt currently exceeds $1 Trillion, with the average student graduating with over $40,000 in debt that will follow them for the rest of their lives. Payments on these debts can be hundreds of dollars every month, hardly a cost someone can afford working part time. As it stands, many graduates have had no choice but to move back home, as the millennial generation has had a particularly hard time finding work, especially in their fields of study.

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All of these problems are linked and melded into an incredibly complex problem that will be difficult to solve from the top down. Weighed down by student and consumerist debt, low wages, increasing costs of everything, and a rising skill shortage, it’s little wonder that the economy is slow to recover. It’s such a large, complicated system that no one person can truthfully claim to understand its intricacies; anyone who claims to have simple, comprehensive solutions is either a fool or a liar.

Instead of looking for solutions to come from a federal level, Wall St, or whichever group holds the reins, we need to look to ourselves. They have had the chance to implement effective improvements and reforms, and look where that’s brought us. Any real change needs to come from the bottom, from We, the People. If we want to ensure a better future, not just for our country and economy, but for the world, we need to do it ourselves; we cannot wait on world political and economic leaders to act on our behalf.

I’m not going to pretend like I have all the answers, but this is an issue I’ve been thinking about a lot in my spare time. I believe that we need to change not only our outlooks, but our very behaviors and lifestyles, if we are to enact any meaningful long term change. The ideas I’ve come up with require essays to themselves, and range from eco-friendly ideas about energy, transportation, and food production, to changing the way we think about work and education, if not the very nature of economics itself. I’ll be sharing my ideas in future posts, which will include both theoretical solutions to real problems, and documenting some first-hand experience as I experiment with some of these solutions myself.

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From the video Wealth Distribution in the US.