The Concept of Income Inequality Essay Example

– a trend that will continue until something is done to reverse it. Another theory that can be brought forth when it comes to income inequality is merit-based hiring practices. Employers (hiring managers and business owners) are always eager, based on their profit motives, to hire same-skilled individuals for lower wages whenever possible.

This ecosystem serves to expand the income inequality gap, whereby incentivized business executives and owners reap the rewards of higher income in their pockets due to increased profitability caused by holding down the wages of workers. Some, like Coyne from Greenhaven Press, claim that income inequality is good for the economy because it gives people who are on the short end of the stick more motivation to create and start new businesses. Coyne writes, “Attempts at imposed equality destroy individuality. Individuality allows for specialization, the division of labor and economic progress.

When it is hampered, so are these outgrowths.” It is argued that some of those who are incentivized by having been monetarily discriminated against will start their businesses, hire more people and therefore boost the economy. To others, however, this is a specious argument, as they see purposeful income inequality, i.e., paying someone less for the same job purely based on their race, ethnic background or recent immigrant status as morally wrong, and they believe economic outcomes should not justify such injustice.

Let’s turn our attention to the Minimum Wage issue, as a means of more equitably distributing wealth from earned wages. The Economic Policy Institutes believes that “Gradually raising the federal minimum wage to $15 by 2024 would lift pay for 41 million workers- nearly 30 percent of the U.S workforce.” However, the

argument from the standpoint of business owners, especially small business owners, like franchisees of fast food outlets, for example, is that a minimum wage of $15 per hour will cause them to lose profitability and will threaten to put them out of business. They argue that putting them out of business is going to put more people out of work and therefore hurt the economy even more.

However, is that really what will happen? That is doubtful and here’s why: The minimum wage will affect ALL business owners, which means all low-skilled and inexperienced workers everywhere will be making a minimum of $15 per hour. This translates into more buying power in the hands of more consumers who will be able to afford to shop and buy more from these small business owners, even if they have to increase prices slightly. Take for example the franchise owner of a Subway sandwich shop.

Subway is one of the largest franchised fast food outlets in the world, with 27,000 stores in the US alone. So, if the minimum wage is federally mandated to be $15 per hour, EVERY Subway owner will have to abide by this law; so will every McDonald’s, Burger King, Wendy’s, Sonic, Checkers, Dunkin Donuts -- you name it – it will affect every fast food franchise outlet in the US. If to keep profits up to a fair level, these fast food outlets will have to raise their prices slightly, then they will all be in the same boat, and none of them will reap a competitive price advantage over the others.

Also, the good news for all franchisees of fast food outlets is that their

main customer base – young people and others working for minimum wage – will have more money in their pockets to be able to afford a slightly higher-priced sandwich or hamburger. In leaner economic times, consumers might balk at this slight price increase, however when taken in context with the fact that every other fast food chain is increasing their prices accordingly, and the fact that said consumers are all making a minimum wage of $15 themselves, then this additional cost will not only be accepted by consumers, it will be welcomed.

According to the Economic Policy Institute, “The benefits of gradually phasing in a $15 minimum wage by 2024 would be far-reaching, lifting pay for tens of millions of workers and reversing decades of growing pay inequality.” They also state that “A $15 minimum wage by 2024 would generate $144 billion in higher wages for workers and would also benefit their communities. Because lower-paid workers spend much of their extra earnings, this injection of wages will help stimulate the economy and spur greater business activity and job growth.”

These beliefs are both something I alluded to earlier in this essay. In conclusion, it is paramount that wealth be more equitably distributed, whether by increased minimum wage or otherwise, for the spending power of consumers to increase more broadly to more people, thereby improving the potential of our economy to strengthen and grow. When income is less equitable and fewer consumers take part in income growth and distribution of wealth, the whole economy suffers.