The Evolution of Incomes in the United States - Essay Example

?A Payoff Out of Poverty? Tina Rosenberg Traditionally it has been held that poverty is a vicious cycle that is sustained by those who are poor through their choices in life. The early leftists used these ideas to justify more resource allocation for the poor such as state sponsored education, health etc. which was designed to remove the poverty. However these views were criticized by the capitalists to contend that no amount of resource allocation would be able to lift people in poverty out of it. Most advanced states in the world have sponsored large welfare programs that have tended to supply services such as health care, education and the like for poorer segments in society. However the provision of such services has failed to have any long term effects that would debilitate the cycle of poverty perhaps because the root causes of poverty are not struck at. Similarly poorer nations that afforded some form of a welfare program failed to see any results because of rampant corruption and mismanagement. In contrast Mexico has embarked upon a program of social uplift using a targeted approach to the causes of poverty. The program has shown a promising outlook as school enrollment has gone up; medical problems have gone down as well as domestic violence and male chauvinism. The recipients of the aid are provided money for fulfilling certain conditions that would improve their living conditions. Based on Mexico’s model similar programs are being launched across the world from China to the United States. Several American cities are already launching such programs in order to lift their urban crowds out of poverty. The success of Mexico’s program is a clear indication that current programs that aim to control poverty need to be redesigned with a more targeted approach. Moreover the legislation in use to support such programs would need a complete overhaul to support a new infrastructure in which the recipients are paid directly and accountability needs to be ensured. Striking it Richer: The Evolution of Top Incomes in the United States Emmanuel Saez The economic recession faced by the United States economy after 2001 has had a lasting impact on income distribution between the top income groups and bottom income groups. Overall the top income groups have accrued more and more income compared to bottom income groups. The share of top income groups in the overall income of the nation is growing while the share of bottom income groups is decreasing. Delayed statistics are only adding to the problem because estimating the distribution of top income becomes much harder. Hence it is far more problematic to guide the economy accordingly to come to a balance. The increase in top incomes has been greater in the 2009 recession than that for the 2001 recession. When compared to previous records dating from as far back as 1913 similarities and differences appear. While top income groups in the pre World War phases were largely rentiers but top income groups today are highly paid executives. Technology and institutional structure may be to blame for the large increases of income in the top income groups as bottom income groups suffer. This indicates that the current economy possesses lope sided growth that tends to favor the top income groups by design. In order to deal with such patterns of growth and to discourage income disparity it is essential to acquire income based statistics as early as possible for each passing fiscal year. Moreover any indications of lope sided growth need to be investigated further for their long term effects on the overall economy and effective legislation should be enacted as soon as possible to deal with these issues. The frame of reference as a public good Robert H. Frank Economists have long related consumption of utilities to personal happiness but recent research suggests otherwise. Consumption can only spur personal happiness to a certain limit after which its effect tends to disappear. The question of frame of reference is highly important with regards to consumption and personal happiness. Research along psychological lines and physical investigation of the human brain’s electrical activity has revealed that human beings’ happiness lies in relativity to each other. The consumption related by economists contends that absolute consumption is the real measure of happiness but this is not firmly corroborated by research based evidence. People living within one nation tend to measure up on each other’s income using relative means rather than absolute means. This indicates that people could be placated by placing resources in close proximity to each other for various kinds of strata in society. If the difference between the rich and the poor was not very large people would be far happier as they would not have to keep struggling in order to augment their social position. People who choose to augment their social position by increasing their resources are far less happy than people with meager resources but with relatively little income disparity. In order to deal with these issues a consumption tax could be levied keeping in mind that such a tax should not slow down consumption altogether. The levy of a consumption tax would ensure that people who tend to spend more and thus waste more are discouraged from doing so. In order to bring about such radical changes in society it would be necessary to push for such measures in the legislatures. However achieving such legislation may not be easy as people would not readily agree to lower their standards of living. A pervasive social campaign directed to this effort could tilt the balance in favor of consumption taxes. The inequality conundrum Roger Lowenstein Increasing college education in America in the 1970’s caused a market surplus of educated labor that in turn lowered their wage rates. However as college education declined the demand for more college graduates increased but there was no reversal to this cycle. The earnings of college graduates continued to rise consistently due to market forces. On the other hand the proportion of earnings of the poorest continued to decline continuously. The jet set life styles of CEO’s demanded large amounts of money that companies were willing to pay creating a multimillionaire environment with income disparity on the rise. This trend has not been reflected in Europe that has traditionally stuck to resource distribution methods in order to deal with income disparity. Moreover the IT revolution in America has sparked a period of continuous high powered growth for a select few people at the very top. There is dire need to redistribute resources to the disadvantaged sections of society but this does not mean that the rich ought to be robbed of their earnings through large taxes. Instead the poorer sections of society should be educated and skilled such that their earnings levels begin to increase. Augmentation of the minimum wage level is one such step that is geared to help out the poorer sections of society. In order to carry out weeping reforms in education and income redistribution it would be necessary for the government to approve of legislation that keeps all strata of society on board. The recent wave of protests across America reflect the pressure that has developed over the years over income disparity so there is urgent need for government intervention to solve this dilemma. Read More