HLA Economics on Income Inequality in the USA

In September 2011, hundreds of protestors occupied

Zuccotti Park in New York’s financial district highlights the rising economic inequality

symbolized by Wall Street banks and investment 

firms. The Occupy Wall Street movement spread nationwide with the chant, “We are the 99%.” In this

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phrase, protestors summarized the stark reality that 1

percent of the US population owns nearly 40 percent of

the nation’s wealth (BGE). While the US has historically

prided itself as the land of opportunity, the economic gap

between rich and poor and rich and middle class is 

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widening. Both Republicans and Democrats alike are

looking for ways to shrink this economic divide, as the

future of our country is at stake. To reduce

economic inequality, the US should increase the minimum

wage and raise taxes on the super-rich.

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In order to reduce

economic inequality, the US should increase the minimum

wage and raise taxes on the super-rich.

The US should increase the minimum wage from

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$7.25/hour to $10.10/hour. This increase would 

raise the income of almost 30 million workers and would

create a boost to the economy as a whole 

(Doc D). How can a $2.85/hour raise have such a big

impact? It occurs because when the minimum 

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wage increases, overall economic activity also

increases. The lower-wage workers who receive  

higher wages are the most likely to spend their earnings

immediately. This means that more money 

will be circulating in the economy, spurring further growth

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(Doc D). Additionally, the real value of the current minimum wage of $7.25/hour has steadily declined

since 1968 (Doc C). In other words, a minimum wage

worker today has less purchasing power than a minimum

wage worker in 1968 (Doc C). True, an increase in the

minimum wage might cause some employers to lay off

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workers, but this has not deterred countries like France,

Canada, and Japan, all of which pay higher minimum

wages than the US (Doc C). To remain a country known

for its upward mobility, the US should raise the income of

our poorest citizens. 

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The US should also raise income taxes on the richest 5

percent. Income tax rates for the super-rich have

dramatically declined since the 1960s, while the rates for

the middle class and poorest Americans have remained

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relatively steady (Doc F). The income taxes on

all Americans are relatively low compared to those in other

developed countries like Germany and Belgium (Doc F). 

Taxing the top 5 percent at the highest rate would bring an

extra $250 billion into the economy. This additional

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revenue could support Americans wanting to go to college,

pay down our national debt, or improve major highways in

the US (Doc H). While raising taxes on the richest 1

percent might have a limited initial impact on inequality (Doc

G), the additional money would greatly increase the 

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opportunity to go to college (Doc H). A college education is

a key to reducing economic inequality. 

In a recent study by a Harvard professor, 5,000 Americans

were asked how wealth should be distributed across the

US population (Doc A). They were shocked to find out that

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the richest 20 percent of Americans didn’t own 40 percent

of the wealth as they had predicted (Doc A). Instead, 

they own 88 percent of the wealth. The flip side of this

alarming statistic is that the bottom 40 percent of the

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population owns much less than 1 percent of the wealth.

In the US, the poorest Americans “are down to pocket

change, and the middle class is barely distinguishable

from the poor” (Doc B).

With a proud history of economic opportunity and mobility,
the US needs to fix the growing economic inequality by
taking the necessary steps to return us to prosperity—not
for just the few, but for the many.