Social Inequality: Raising the Minimum Wage to address Income Inequality

Social Inequality: Raising the Minimum Wage to address Income Inequality

 Inequality is quite prevalent in the modern world in both developing and developed countries. In each country, there are massive social and economic inequalities that threaten the very foundation of social cohesion. A vital example of this inequality is visible in the pricing of goods made in developing countries and sold in the developed ones (Weeks, 2005, p5). The workers in the developing countries only receive a small portion of the selling price as the rest of the money ends up in with the owners of the corporations. For example, people in the US and Europe pay a substantial amount of money for their shoes and clothes. However, the laborers in the developing countries who make these commodities barely receive a living wage. Inequality can also be viewed in terms of wealth and income. The one percent control almost 70% of the entire global wealth while the rest of the population is left to scramble for the left over (Brian, 2015, 12). Furthermore, there is a sharp income and wealth inequality between the various demographics, especially between minorities and Whites in the US and between men and women (Weeks, 2005, p5). While income inequality is an important area to focus on, social inequality covers a wide range of other essential aspects of inequality. Social inequality is defined as the condition where people have unequal access to resources, opportunities, and services within society. Social inequality is a much broader phenomenon that is embedded in social stratification. It affects things such as wealth, power, status, and lifestyle. There is a perpetual increase in social inequality around the world. The devastating effects of social inequality on people and wealth make it hard to ignore. One of the worst forms of inequality if income inequality, which is perpetually increasing in OECD countries (Brian, 2015, 12). In the US, the last decade alone has seen a significant widening of the gap between the rich and the poor. While the U is a rich country with a striving economy, millions of people are still living below the poverty line (Boushey, 2014 1). Therefore, raising the federal minimum wage level has been proposed as one of the best ways to end poverty as it will give most low-income individuals a living wage.

Background on Inequality

Social inequality often involves systematic and institutionalized disparities between the various demographics in society, especially in relation to power, control over goals, access to resources and opportunities, and money. Using the above definition, this discussion n inequality makes two distinctions. The first is the disparities that exist in the distribution of desirable life outcomes and opportunities. There is much inequality in the distribution of things such as health, education. Wealth and political power, among others (Weeks, 2005, 4). The second distinction involves the disparities in the distribution of opportunities and outcomes among the members of a certain group (Weeks, 2005, 7). Although the distinction between the inequality of opportunity and outcomes seems obvious, it is often hard to identify in practice mainly because the opportunity is a slippery notion. It is, therefore, hard to measure the inequality of opportunity. In every society, individuals have different backgrounds, resources, and distortions. It, therefore, becomes extremely difficult to provide the same access to opportunities for everyone. The unequal distribution of outcomes does not necessarily mean there is an inequality of opportunity. For example, in a society where everyone has equal access to health care, some individuals may be healthier than others because of genetic factors and personal lifestyle choices. However, if the disparities I health outcomes are spread on some demographics more than others, it could give one a reason to suspect that there are unequal opportunities for living a healthy lifestyle within that demographic. Inequality among group members is important to understand as it can highlight the causes of inequality and the institutionalized patterns that support it. Group inequality is often based on age, race, ethnicity, religion, and gender, among other aspects (Weeks, 2005, 15). It is firmly based on the unequal access to power, opportunities, and resources, whereby some individuals have more access to those things than others. Scholars today are concerned with identifying the elements that cause inequality and the institutionalized structures that fuel it. They are also concerned with analyzing how unjust laws, racism, patriarchy, and other social and political practices contributed to the current state of social inequality, especially in the US and other Western countries. For example, racial inequality in the US is rooted in slavery, segregation, Jim crow laws, mass incarceration, and other institutionalized patterns that affected blacks and other minorities. Some of these patterns and their effects, such as mass incarceration is still present to date. Gender inequality is rooted in patriarchal norms and cultures that adversely affect women. Gender inequality is also a multidimensional issue, especially because women of color face more obstacles than white women. Despite the various legal and institutionalized changes that were introduced to eliminate the barrier and obstacles, inequality continues to persist in modern society. Some of these legal changes include the 14^th and 16^th Amendments, the Civil Rights Act, the Americans with Disabilities Act, and the various legislation that criminalized sexual harassment at work. There have, however, been major achievements in the area of outcome inequality. For example, the racial and gender gaps in income and wealth are slowly but steadily being eliminated, with more people being given the opportunity to self-actualize (Weeks, 2005, p5). Nonetheless, inequality is a persistent phenomenon that cannot be eliminated. For the most part, the best society can do to eliminate barriers and uplift vulnerable groups through various policy programs such as affirmative action.

Inequality is a multidimensional phenomenon that is caused by a host of social, institutional, and historical conditions, among others. A recent study on inequality that was published by the OECD states that in the past two decades, income inequality showed heterogeneous trends in member countries (Weeks, 2005, 22). More countries were experiencing a surge in inequality than those in which it was declining. For example, while inequality increased substantially in Finland and New Zealand, other countries such as Germany, Italy, Sweden, and Portugal experienced only minor increased in inequality (Weeks, 2005, 22). In the last 20 years, profound structural changes aimed at decreasing employment and income for some groups have caused widespread poverty and affected the stability of the global markets. Most western economies are struggling to eliminate inequality because of the potential adverse impact of poverty in their markets. The paradox of modern society is that while incomes and wealth have increased as a result of globalization but at the same time, the number of people falling into poverty in the US and other western countries is also increasing. For example, in the US, more than 14 million people are living in poverty.  In this case, poverty means people who are living below the OECD set $2 a day (Weeks, 2005, 15). Millions of people in the US are supported through government welfare programs such as food stamps. There is also a steep rise in homelessness across major cities such as California and New York, despite those cities making major contributions to the global economy.

In the US, the problem of income inequality is worsening. Many corporations and high earners have received tax breaks. Companies such as Amazon have earned up paying zero in taxes despite making tens of billions of dollars in profits each fiscal year. While the executives and owners of such corporations continue to get rich, the money rarely trickles down to workers. Many Amazon workers have complained of being overworked with little pay. Additionally, there is a debate in public and in the US senate about increasing the minimum wage to $15 an hour in order to ensure that all people get a living wage. Globalization has created many problems for both developing and developed countries. In the US, for example, many companies moved their manufacturing plants to the far East in areas such as China and Vietnam where they can find cheap labor. The workers in these companies are often overworked and underpaid. The lack of effective worker-centered political structures such as unions places the workers at a vulnerable position (Brian, 2015, 11). On the other hand, in the US, as companies left, many people were plunged into unemployment. However, a steady economic recovery in the last decade has seen unemployment numbers hit a historic low. However, there is a steep increase in homelessness and the number of people living in poverty. Barriers such as the high cost of living, student debts, and racism, especially with regard to immigrants and minorities, ensure that a perpetual system of inequality exists.

Income inequality is worsening in the US in the recent past as the gap between the rich and the poor keep on worsening. One-quarter of the workers make less than $10 an hour. This is not considered a living wage given the current cost of living, especially in major cities around the country. This kind of income has caused millions of Americans to live below the poverty line. In the past decade since the recovery of the financial crisis, the rich got richer in the US with 10% of the workers taking home 50% of all income (Brian, 2015, 13).  This is the highest percentage in 100 years, and it shows the rate at which the income gap is widening. A 2015 study showed that 10% of Americans have, on average more than nine times as much income as the rest bottom 90% (Brian, 2015, 13). Additionally, the 1% top mega-earners have 40 times as much income as the bottom 90%. The total income has been growing steadily, with a 25.7 percent increase from 1993 to 2015. However, 52 percent of this growth went to the top 1%. From 2000 to 2006, there was a 15 percent increase in the number of Americans living in poverty, leaving the number of American workers earning less than $10 an hour to 33 million (Brian, 2015, 14). Although these figures have moved in recent years, more than 15 million Americans still live below the poverty line with an annual income of less than $20,000, which is below the poverty line for a family of four (Boushey, 2014 5). Most of these workers receive no health insurance, sick days, and retirement savings plans from their employers. With the high cost of healthcare in the country, most people have a fear of getting sick as it could mean instant bankruptcy. As health inequality has been on the rise, especially for the poor, the cost of medical care is perpetually increasing for everyone. Furthermore, most people living below the poverty line cannot afford preventive care, and therefore, they continuously end up in emergency rooms. A 2009 study showed that 47 percent of the people who went to the hospital said that they visited because it was their last result (Boushey, 2014 6).  They used the emergency room as their primary physician.

While worker productivity has increased by 15 percent since the last financial crisis, the average wages remain mostly unaffected. The rate of work does not match the compensation given, especially for low-income earners. At the same time, the cost of living is going up. Things such as housing, healthcare, food, and college education remain largely unaffordable for millions of low-income families. Even with the tax breaks and an increase in corporate profits each year, the average pay of workers remains unaffected. Boushey (2014, 21) provides some of the biggest examples of the inequality are be Marathin Petroleum, where the CEO made$19.7 million, which has 935 times more than the median income of the workers’ pay of $21,034. Whirlpool made $7.1 million with the average workers’ pay being $50, 000. Honeywell pays the average worker 333 times less than the CEO, who makes about $16.8 million per year.

Who is to blame?

The OECD report identifies the key drivers of inequality as demographic changes, labor, and capital market inequalities and the redistributive effect of government revenues. For example, the widening of the earnings dispersion has created both income and wealth inequality. For example, between 1990 and 2005, there was a steady increase in the inequality of hourly wages in several European countries, including Germany, Denmark, and the UK. The only OECD member countries where this kind of inequality reduced were Finland and France (Boushey, 2014 3). In Europe, some scholars have formulated various hypotheses to explain the rise in inequality in the last three decades. One of the most widely accepted explanation is the abrupt shift from manufacturing to service production and technology, especially in international trade. The prevalence of technology-based economies has put pressure on the labor market to produce highly skilled individuals. There were no substantial changes in the educational systems to supply adequate labor to meet this demand, especially in the short run. Another key explanation for the inequality is that changes in the global economy with the rise of countries such as Brazil, China, and India which have a large high skilled labor force and large market for their products. These countries have enhanced their manufacturing capabilities, leadership outlook, and adopted much more sophisticated ways of managing their economies (Boushey, 2014, 6). With most American corporations moving their manufacturing activities in China and India, American workers were always bound to suffer. Returning American manufacturing jobs was one of the key campaign promises of resident Trump. Since his election, the US has engaged China in a trade war by imposing a series of tariffs on key chine goods. The tariffs were intended to facilitate trade negotiations between the two countries. However, China retaliated by imposing similar tariffs on American gods. The consequence of the trade war was that American farmers and other businesses made billions of dollars in losses. The Government eve set aside about $10 billion to set off the effects of the tariffs on farmers. Furthermore, most of the institutionalized structures that increase income inequality have not been addressed. In the US, income inequality is multidimensional as it occurs on different levels.  For example, women earn less than men for the same job positions. Additionally, Black in the US earns way less than White men for even scenarios where the Black person is more trained than the white person for the position.

Increasing the Federal Minimum Wage

In the US, increasing the minimum wage is increasingly viewed as a left-wing political position, with most of the top Democratic legislators making the initiative to introduce legislation to that effect. President Obama, Bernie Sanders, and Elizabeth Warren, among other candidates, have proposed raising the federal minimum wage as a way of reducing income inequality and uplifting millions of people from poverty. Other figures on the fright have argued that increasing the minimum wage will eventually hurt workers as employers will either reduce the number of workers or their working hours in order to meet the increased costs (Boushey, 2014 4). However, one thing that most economists agree on is that increasing the minimum wage is an equitable solution to the current income inequality crisis. In a society where the CEO makes millions of dollars and the average worker cannot earn a living wage, the problem then is not the lack of resources but the inequitable distribution of those resources. Income inequality is often supported by institutionalized patterns, such as the lack of legislation to increase the minimum wage. The argument that increasing minimum wage to $15 an hour would hurt workers as been disproven as it has worked efficiently in Washington State and Canada for the past two years, where the minimum when the minimum wage was increased.

Raising the minimum wage to at least $10 an hour would uplift many people from poverty. At the current federal minimum wage rate of $7 an hour, a worker earning this wage and working 40 hours a week makes 15,080 over the year (Boushey, 2014, 4). While this amount would put the adult above the poverty line, it puts those with families below the line as it cannot support a family. The poverty line for a family with one adult and one child was $16,057 in 2013. A full-time minimum age worker with one child was, therefore, about $977 short of the poverty line each year. Increasing the minimum wage between $10 to $15 an hour would boost the average earnings of the low-income workers and uplift them from poverty (Boushey, 2014 4). At the rate of $10 an hour, the minimum wage worker would make about $20 000 a year, which is significantly above the poverty line, even for a family of two. At the moment, there is a policy plan to increase the minimum wage to $15 an hour (Boushey, 2014 4). Nearly a quarter of the people who would benefit from this policy would be low-income earners who make less than $20, 000 a year. In fact, a $15 per hour minimum wage would also uplift families with one adult and two children, whose poverty line is at $18,769. Furthermore, 52% of the workers who would benefit earn less than $40,000 a year (Boushey, 2014 4). Therefore, raising the minimum wage can help both minimum wage workers and those who earn above the minimum wage.

Economists have also noted the social benefits of raising the minimum wage. For example, a 10% increase in the current federal minimum wage would immediately decrease the poverty rate by around 3%. Therefore, in 2013, when President Obama proposed the Fair Minimum Wage Act with the minimum wage being around $10 an hour, the poverty rate for non-elderly Americans would have been immediately reduced from 17.5 percent to 15.8 percent (Boushey, 2014 7). This increase would have translated to around 4.6 million Americans being lifted out of poverty. Furthermore, increasing the minimum wage would reduce spending on social welfare programs such as the Supplemental Nutrition Assistance Program. Thereby the number of people dependent on food stamps to survive would reduce significantly.

Contrary to popular belief among conservatives, reducing the minimum wage does not hurt the economy. On the contrary, economists have shown that increasing the minimum wage can boost economic growth, higher unemployment, and productivity. Raising minimum wage is an essential way of addressing wage inequality in a society where the top 10% take home about 50% of the total annual income. Evidence from the Washington State and Canada shows that raising the minimum wage had minimal impact on unemployment in the long run (Boushey, 2014 7). The market does not suffer from the problem of scarcity but one unequal distribution of income. Thereby, raising minimum wage does not necessarily strangle businesses as most of those in management earn way more than the average worker. Increasing the minimum wage ensures that the income is distributed equitably to all workers. Raising the minimum wage does not only elevate people from poverty but also addresses some of the income disparities between the different demographic groups. The biggest beneficiaries of this initiative would be women and minorities who earn substantially less than their white male colleagues (Boushey, 2014. 8). While most of these groups are lifted from poverty, they are able to cate opportunities for self-employment in the future. They are also able to reduce their dependency on welfare programs and the number of jobs they have. At the moment, the US is reporting an increase in the number of jobs created each month. However, despite this increase, most f these jobs are minimum wage with people having two or three jobs to make ends meet.

Conclusion

Inequality is a perpetual problem in all countries, including the OECD ones. Inequality of choice and opportunity affects certain demographic groups by trapping them in poverty. While the US economy and that of other OECD countries are booming, the income gap between the rich and the poor is widening. Millions of Americans still live in poverty despite the tremendous growth in the economy since the last recession. Income inequality results in heath and housing inequalities, among others. The result is more poor people living below the poverty line and unable to afford food, higher education, and housing. Despite the cost of living going up, the federal minimum wage has remained unaffected in the last ten years. There have been many public debates about increasing the minimum wage to give millions of works, but such debates have not actualized into effective policy as disagreements between the right and the left on the actual effects of raising the minimum wage are common. At the moment, raising the minimum wage would uplift millions of Americans from poverty by giving low-income earners a living wage. Raising the federal minimum wage will not only reduce the income inequality and poverty rates but also increase economic productivity. The more the workers are paid, the more than are motivated to be productive.

References

Boushey, H., 2014. Understanding how raising the federal minimum wage affects income            inequality and economic growth. Testimony before the US Senate Committee on Health,    Education, Labor, and Pensions, “From Poverty to Opportunity: How A Fair Minimum          Wage will Help Families Succeed,” March 12.

Brian, K., 2015. OECD Insights Income Inequality The Gap between Rich and Poor: The Gap      between Rich and Poor. oecd Publishing.

Weeks, J., 2005. Inequality trends in some developed OECD countries. UN.