Topic: EconomicsEconomic Development

Last updated: March 27, 2019

In the article “Confronting inequality” by Paul Krugman.

Krugman claims that the inequality in the United States has led America into “a new Gilded Age”. In this article, he explains why people should care about income and social inequality that has reach the Gilded Age levels. He also tries to explain how bad inequality is and the things that can bring inequality up or down. He gives reasons of why he and Americans should care about the rising inequality.

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Krugman says, “One reason to care about inequality is the straight forward matter of living standards. The lack of clear economic progress for lower and middle-income families is in itself an important reason to seek a more equal distribution of income” (322). He insists that we should reduce continuous inequality between those with low-incomes and those with high-incomes existing in the U.S., which affects our societies and our lives in many negative ways, although many of us believe that all Americans will succeed through hard work.The United States does have controls that limit organization’s powers and directions that secure laborers from awful work conditions and subjective and unreasonable decisions from the organizations, the middle class are suffering because of the income inequality. “Income inequality definitely brings endless social inequality”. For example, families with lower income cannot easily afford health care.

Their children are “more likely to have wellbeing problems” such as destitute sustenance. Other than these health problems, getting a great education is also difficult. “Middle-class families buy houses they can’t really afford, taking on more mortgage debt because they’re desperate to send their children to a great school and forces inequality means that the desirable school districts are growing less, and more expensive to live in”. Middle-class families are moving to a more expensive school district in order to give their children a better chance of succeeding in the U.S.

society. Better instruction with more opportunities can increase the chances of getting better jobs and greater salary level. However, according to Krugman, having high test scores and having great talent is not enough.

He states that “family status mattered more”. Students who have a higher-status family are more likely to finish college than high-achieving students with parents with lower income. Although I agree that having parents with more money makes it easier to financially afford higher education, I do not believe that a parent’s financial status should be a determining factor to their children’s future social status and success. There are many smart but underprivileged students who are able to go to college with the help of grants and scholarships. It might be difficult to pay for college, but motivation and work ethics can help students gain connections, experience, and better jobs despite their financial disadvantage.In order to decrease the income and social inequality, Krugman suggest “undoing many of the tax cuts for the wealthy and closing some of the obvious loopholes in the U.S.

system”. These solutions can increase revenue, decrease income for the wealthy, and provide health care and other benefits to the middle-class families. There are flaws and negative consequences that will come with it. In the article, Krugman claim that income inequality “corrupts our politics” as the wealthy influence “U.S. government policy”.

Income inequality is one the biggest challenge faced by different countries around the globe, such as China, India and the U.S. In the U.S, income inequality has been on the rise, especially among the highly educated and lowly educated members of the society. In the article “The Upside of Income Inequality”, written by Gary S. Becker and Kevin M. Murphy, they suggest that income inequality is beneficial to our society because it creates an opportunity for those who do not make a lot of money to go to college and get a degree.

The article tries to demonstrate how higher returns for the development of human capital are desirable and beneficial to the society. “We believe that the rise in returns on investments in human capital is ben¬eficial and desirable, and policies designed to deal with inequality must take account of its cause (Becker and Murphy). One of the arguments made by the authors in this article is that investing in human capital development is having more positive returns nowadays than it was the case in the past. The authors support the argument, by providing statistical data demonstrating an increased income for those with higher education that it was the case in the 1980s (Becker and Murphy). I agree with the authors that higher education is paying more today. Those with a college education today earn more than those with high school education, and this is the main reason why income gap is rising in the American society. Another argument made by the authors is that income inequality can be addressed by implementing policies that address the issue of human capital development returns.

I agree with the authors that while trying to address income inequality, the economic policies employed should not hurt the returns realized from making an investment in higher education is key in the development of skills needed to advance economic development in the society. Getting a degree today is more beneficial than it was in 1980 because a person can make 70 percent more than a high school graduate if they get a college degree compared to 1980 where a person made only up to 30 percent more than somebody who was only a high school graduate (Becker, Murphy 582-583). If the minimum wage continues to increase to accommodate those who are below the poverty level, then income inequality will become less and less. If this happens, there will be less motivation to go to college and get a degree. Becker and Murphy also believe that the increase in educated individuals will result in economic growth, “The potential generated by higher returns to education extends from individuals to the economy as a whole. Growth in the education level of the population has been a significant source of rising wages, productivity, and living standards over the past century” (Becker, Murphy 585-586). In other words, the higher returns to individuals who receive higher education results in higher wages which excites the economy. In conclusion, raising the minimum wage would not be beneficial.

If the minimum wage were increased it would increase prices of consumer goods for everybody; including those who did not receive a wage increase. This could in turn result in less spending to boost the economy. A minimum wage increase would also increase poverty because companies may cut hours or fire employees to make up for higher employment costs. In addition, raising minimum wage will put a drag on the economy because people will spend money in the first year on things such as cars and houses, which are financed. However, after the first year they will spend more money to pay off the debts they incurred and thus will spend less money to stimulate the economy. Also, not increasing the federal minimum wage has resulted in a lot of people getting a college education, and those who receive a college education making much more than a person who does not.

For these reasons, minimum wage would be better left where it is at. Instead of raising minimum wage, different policies should be put into place to help those who are in poverty.David Leonhardt believes that that there is a great inequality between the rich and the poor. In his essay “Inequality Has Been Going on Forever…But that Doesn’t Mean It’s Inevitable” Leonhardt argues that the rising inequality between the rich and the poor in our country hasn’t always been there. Leonhardt states that “not so long ago, the rich owned a much smaller share of this country’s resources” (543). This means that the rich have been accumulating most of the wealth in our country.

Leonhardt believes that this can be changed by education. “The Great income gains for the American middle class and the poor in the mid-to-late 20th century came after this country made high school universal and turned itself into the most educated nation in the world” (546). He believes that with the more education in a society the equal the society will be.


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