Blinding beacon of income inequality

by Samir Salifou

Income inequality in America has reached levels of national embarrassment. If a government’s actions should reflect society’s desires, then somewhere along the way the American democratic process has gone awry. According to a Harvard Business School study, 90 percent of Americans believe that the income gap is too wide. There is a national consensus around fixing income inequality, and the solution isn’t difficult. First, we must raise the minimum wage and stop subsidizing low-cost jobs. Second, we must make access to a higher education affordable and attractive to youth.

The numbers are staggering. In a study conducted by Harvard Business School Prof. Michael Norton, more than 90 percent of Americans believe that the top quintile of society should hold 33 percent of the national wealth and that the bottom 40 percent should hold 25 percent of the national wealth. The real numbers are far different.

The top quintile holds more than 80 percent of the national wealth and the bottom two quintiles hold sequentially 0.3 percent of the national wealth. If 9 out of 10 Americans agree that the income gap should be narrower than it is, then this is not a partisan issue. It is an issue of national importance that needs to be addressed urgently.

Moving past the rhetoric of hope and change, we should look at concrete solutions. Yet, issues as basic as economic justice and wealth distribution seem to take a backseat to artificial numbers such as Gross Domestic Product, which simply measures how much stuff America produces. Real GDP has continued to increase, while the income gap has continued to widen.

Unfortunately, any serious discussions about how to fix this problem start with the idea of some new liberal big government redistributive program, or the callousness of conservative trickle-down economics. What we, as a society, overlook is getting back to the basics by making sure the ladders of opportunity are available to the least advantaged among us. Everyone deserves a fair shot at social mobility.

The first step is simple: raise the national minimum wage. The current minimum wage, adjusted for inflation, is 23 percent lower than it was in 1968. This may be why a recent Gallup poll shows an overwhelming 76 percent of Americans favor increasing the minimum wage, while a separate poll in the Washington Post consistently found 67 percent in favor. Both polls had less than a 4 percent margin of error.

Beyond the politics of raising wages, this policy would move us forward to the simple structures of fairness that America stands for while alleviating the nation’s fiscal burden to the socioeconomic safety net. The University of California at Berkeley Labor Centerfound that 52 percent of front line fast food workers are enrolled in one or more government programs, costing American taxpayers over $7 billion per year. Low wage industries, then, are a negative externality, which is a market failure. In essence, instead of the $200 billion per year fast food industry providing a living wage to these employees, the taxpayers are subsidizing them by picking up the additional cost.

Requiring that corporations not pass their labor cost to American taxpayers may free additional funds to increase access to higher education. The Brookings Institution found that “the earnings of college graduates are much higher than for non-graduates, and that is especially true among people born into low-income families.” In fact, according to Brookings, children born into the lowest quintile of American society only have a 16 percent chance of remaining in that same quintile if they earn a college degree.

Imagine the possibilities if we made college more affordable to these children by redirecting a portion of the $7 billion going to the fast food industry back to educating the people that can use it the most. We may actually move towards what 9 out of 10 Americans believe to be a just society.

Social justice, defined as equality of opportunity, is the bedrock of American social mobility. The very origin of our republic was triggered by a “tea party” over an unfair tax. We can draw parallels between that injustice and the wide divide between the poor and rich in this country. This is not another attempt at class warfare, but a critical look at American meritocracy behind the veil of ignorance. If America aspires to be “the shining city upon a hill” that President Reagan talked about so frequently, then income inequality must be an issue that we handle now to ensure that her beacon shines bright for several generations to come.

This article represents the opinions of the author only, and not those of the Virginia Policy Review.