How I think we can solve income inequality

Income inequality is one of the major global issues talked about today. It is the bane of the working class’s existence, and, something which a great number of the 1% consecrate fervently. The two countries where this Brobdingnagian inequality is coming most to light, are the United Kingdom and the United States of America. As a result, there will not be that many figures in this article; simply theories, which I think may help solve the problem. If you do not think that income inequality is a massive issue already, take a look at these figures: the income of the bottom earners worldwide increases by only 1.4% annually, however, the income of the richest 1% increases by 2% in the same time period.

In the United States of America, income inequality increased the most among all the developed nations – the richest 1% growing by 275%, while wages of the poor grew by only 20% in 30 years. These statistics show that income inequality is not a forgotten relic of the past, nor something which we can put off nonchalantly. It is something we must fix now, and below is how I think we should do it. I would just like to thank Robert Reich before I start this, as his steps to reducing the inequality have been greatly inspirational and beneficial to my thoughts, although I do not concur with all of his ideologies.

My first solution is to raise the minimum wage, and after having done this, to index it with inflation. This will ensure that your average Joe will be able to cope with the rapidly increasing cost of living, while hopefully also having a bit of disposable income to boot. Indexing the minimum wage to inflation is an essential component to this solution, as we cannot let this simply be a Band-Aid on a broken leg; that is, we cannot let the problem lie after simply increasing the minimum wage. The solution must be an ongoing and progressive one, and indexing the minimum wage to inflation certainly ticks all of those boxes.

In addition to this, we need to make high quality childcare available to the majority of the population. As of now, high quality childcare simply costs too much for the majority of the working class to afford; and as such, inequality is simply getting worse, as the children of the rich are getting better services, and in turn, a higher likelihood of social and cognitive development, which means that they are more likely to take up the high paying executive positions than the others, whose parents were perhaps not so lucky. Unequal starting points only mean that the finishing points will be unequal as well, and we must address this problem by giving everyone a uniform starting point, meaning that people win the race based on merit, rather than a never-ending cycle of rich breeding rich. Although I do acknowledge that this problem can never be completely fixed, this solution will definitely help the problem, making sure that more people can help their children get on in life from the very beginning.

Finally, my last step to solve income inequality is to introduce fairer, more progressive taxes, meaning that we save billions of pounds a year through tax avoidance at the top. It is objectively not fair and certainly not progressive to have companies like Starbucks paying only £8.6 million in tax over the course of 14 years. The money saved from closing down tax loopholes on wealthy individuals and large corporations could be used in improving the quality of state education in the UK, or improving the quality of childcare from the ages of 1 to 5, as I mentioned above.

Moreover, many of these corporations also cause environmental degradation, so in effect, you would be killing two birds with one stone like this, reducing the gargantuan gap between rich and poor while promoting the environment. I do not in any way suggest that these steps are the only ways to reduce income inequality, nor that they will definitely work, but as of now, in my opinion at least, they certainly are some of the best options.

14 Comments Add yours

  1. Hidden says:

    Close tax loopholes and you end with firms paying a lot more tax. Which means less profit, which means making redundancies and store closures. In turn, this means less indirect taxation (e.g employees who work their will pay tax) and higher welfare bills.

    Rostow model – stages 4 to 5. Look at the East, they are transitioning to a stage 5 economy and they will tax just as much as we do now. If we start taxing more then these corporations will simply flood Asia and leave the west. It’s the enivitable geopolitical, geoeconomical shift that will occur sooner than later if we close tax loopholes.

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  2. Adi says:

    This is a great piece Shrey!

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  3. Hooten says:

    First you say that inequality is growing, then you describe it as “stagnant”. Second, you mention how the Average Joe will be put at ease because of COLAs and that “hopefully” he’ll have still have DI leftover. Economics is not a hope based science. The concern is not the Average Joe (it’s flawed to assume the average person is working at minimum wag) but rather those who working at minimum wage and still not getting by. You make no reference as to where you found the Starbucks number, if it’s inflation adjusted, how tax policy has changed over those 14 years, or even how Starbucks compared to other companies in terms of revenue devoted to taxes.

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    1. Thank you for your comment, but I don’t really think that you’ve read my post all that well. At no point did I describe inequality as “stagnant”. Although I didn’t mention whether the Starbucks figure was inflation adjusted or not, I thought that it would be implied that it was, as it is. I chose the example of Starbucks as they are a well known company for evading tax and I thought that they would be a good example to accentuate my point. I also think that the concern is the average Joe, and while I do agree that we should worry more about those on the minimum wage, it is a fact that we need to address the fact that even the average wage does not get one that far any more. This is the very problem with income inequality; that only a certain sect of people at the top can live within their means.

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  4. Balls says:

    Public shaming. It needs to become embarrassing to be filthy rich, and those who are need to be publicly shamed so they stop taking so much. Everyone wanting to be rich and richness being worshipped in the media continues the harmful trend. Big money has political influence and will act to stop tax laws or create loopholes around them. It’s a fantasy to think this will work. But you are young & dreamy eyed. In a way that is good. But you should be this concerned about money yet. Go have fun!

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    1. I absolutely agree that the monetisation of society only perpetuates this harmful trend.These are only suggestions, I know, and I really doubt that they will be implemented, but these are merely idealistic 🙂 Thank you so much for the comment!

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  5. Interesting question posted earlier. I agree tax on corporations needs to be increased – it accounted for 44% of American tax revenue in the mid-90s but is now at 9%. However, as one ardent conservative mentioned earlier in the comments, if the UK and/or US can force through legislation through their respective Houses and the UK House of Lords and US Senate, will there be redundancies and will corporations flee the country to protect profits? This is interesting. How do you propose solving this problem?

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    1. Mid-90s correction – meant mid-20th century, around 1940-1950. Can’t remember the exact date. Figures courtesy Bernie Sanders.

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    2. That’s a difficult one. The trick is to strike a balance between taxing fairly and not driving large corporations away. We must remember that there are other reasons for companies relocating apart from tax, and the best way to persuade these companies to stay is by providing a business-friendly climate, however also with fairer tax to help solve income inequality. I suppose we don’t know until we’ve tried it 😉

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  6. Scottie says:

    Reblogged this on Scotties Toy Box and commented:
    Well done sir, very well done. You covered all the bases and the top contributors of the problem. You are so correct that a once fix won’t cure the problem. I love how you approach the problem from more than one way, trying to see both the benefits and problems with the fixes. I also love Robert Reich and enjoy his videos on economics. History has shown you are correct, despite the greedy ones wanting to pretend that they somehow have a magic cure that has not worked in 40 to 60 years. Thanks again. Great post. Hugs

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    1. Thank you very much 🙂

      Liked by 1 person

  7. Scottie says:

    In answer to companies leaving a country, no not a problem. First they may want to take their corporate headquarters elsewhere however that can be fixed with laws requiring a company that does business to have a legal present in the country they are selling products, which requires them to pay the tax. No time in history in the 1900’s did any company leave the place they were selling product and refuse to sell that product in that country due to taxes. IN fact history has shown the opposite. Companies will flock to a place where the people have money to buy, and will hawk their products as much as possible. look at china. For a long time no company cared, now that they have money to spend the companies are fighting to get a foot in the door and compete there. Simple fact is this… If you have a product to sell, and you have customers to sell to , you will stay there and sell your product. History also shows business did better when the tax system was more fair and they were taxed more. History , it is proven. Thanks and hugs

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