Income Inequality
What is income inequality? According to McConnell and Brue, authors of Microeconomics the 14th edition, income inequality is "the unequal distribution of an economy's total income among persons or families." They also point out that some of the causes of income inequality are "differences in ability, education and training, discrimination, tastes, and risks." As a whole we saw these factors very useful in explaining why it exists, but the problem with these is that they are mostly abstract. It is almost impossible to measure someone's tastes and preferences, but it is easy to measure the level of education and the degree of discrimination. Before researching this project we came up with factors that we perceived to be major factors causing income inequality. These factors consist of racism and sexism, free trade and foreign trade, welfare, and taxes. We believed that these factors are the main causes of income inequality. Racism and sexism are presented in the economy in the form of lower wages for equal work. The belief that NAFTA moved jobs north or south of the border. That taxes cause more income inequality than they balance out. Welfare is also believed to be a factor because it may offer better benefits to thos
Another 117,900 jobs are supported by foreign imports that stay in the state. After reviewing the information that we gathered our group has concluded that, in Washington State, the main reasons for income inequality are race/sex and taxes. One of these can be fixed by a simple budget change. The other is something that can only be changed with acceptance and time. The real question is should we even be concerned with income inequality. The most influential man in the nation addressed many people in his field in a speech in 1998. His name is Alan Greenspan. The question he put forth was "should we be concerned with the degree of income inequality if all groups are experiencing relatively rapid gains in their real incomes, even though these rates of gains may be different." The question is about how relevant income inequality is compared to the larger picture of our nations economy and social problems. Is it more important to have economic growth or to have income inequality? Now that we have pointed out the important factors that welfare works with and against, we can examine the welfare system. Washington State's welfare system is called Temporary Assistance for Needy Families or TANF. It is a five year program that is set up to help the families on it get job training, education, and a job. This program has been having great success over the last two years. Washington State has been following 3000 randomly selected families on TANF from March 1999 to March 2000. This study is called the WorkFirst Study. This study has kept tabs on these families for one year to see how they faired on TANF. The study had quite surprising results. "The proportion of families receiving TANF fell dramatically after March 1999 when all recipients were on TANF. Only half of them were still receiving support from TANF in March 2000. Average wages have increased from $7.20 in March 1999 to $7.80 in June 2000. "Washington State's two-way trade reached $104 billion in 1998. This brings us to the last concept that our group felt was a factor of income inequality. This brings us to taxes. Taxes are important because they fall into two major categories. These categories are progressive and regressive taxes. A progressive tax is one that impacts the rich more than the poor. Two examples of this are property and income taxes. Property tax because it is based on how much property one owns and how much equity is held by the property. So the rich normally pay more in property taxes. Income tax is progressive because the more money one earns the more is taken by taxes. The other form of tax is regressive. That means that it impacts the poor more than the rich. Sales tax is a prime example because it takes a larger portion of the incomes of the poor as opposed to the rich. This is important because Washington State does not have an income tax and supplements this lack of income by increasing its sales tax. It does so to take advantage of tourism. This impacts income inequality because the poor and the rich do not have their income taxed, but the poor are hit harder by this because a larger portion of their income is taken by the sales tax. This increases income inequality because the rich end up having more income left over afterwards than the poor. This only causes the poor to become poorer and the rich to become richer.
Some common words found in the essay are:
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Approximate Word count = 2431
Approximate Pages = 10 (250 words per page double spaced)
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