The impacts of income inequality on the US population are also different. Income inequality had an enormous impact on the United States’ history with the Great Depression that occurred in 1929. The principal impact of income inequality is surely the poverty rate that increases in the United States because a lot of the income goes to the richest population. As explain in this paper there are a variety of different technics to calculate the inequality within a country, some methods are more reliable than others. The most commonly used method is the Gini coefficient, which can help to compare the level on inequality between countries.
If employers are paying employees more then they will raise costs to offset the added expenses. This will cause the buying power of the dollar to decrease, making it so people who received the minimum wage increases will not be making any more money than they otherwise would’ve, and people who did not have their pay increased, will be making even less money then they had used too. This would do nothing but increase the poverty rate even higher, doing exactly the opposite of what the counter argument says it would. The second way this counterclaim is disproven, is because of the increase people will see in the cost of living. With the price of housing, food, etc.
In the job market, the increase in minimum wage will cause a shortage, making it less profitable for companies to employ many workers. This will result in higher unemployment. In response to such criticisms, the government has come up with a concept called the “voluntary living wage,” which is an “attempt to encourage firms to pay higher wages” (Economics Help). A living wage is an “hourly wage rate considered the minimum level to provide the essentials of modern living” (Pettinger, 2012). To put it into simpler words, a living wage is an adjusted type of wage that takes into account the average price level of the country.
For example, the neoclassical model, simply put, states that the high cost of labor will decrease the demand for labor. This model assumes that each worker receives the minimum wage which is not completely inaccurate but the assumption can yield imprecise results. Another model is the monopsony model in which the employer’s side is compared to a labor force in which all employees are paid the same. This model can lead to an increase in employment as well as a decline in employment depending on the wage set by the labor force. According to recent studies by the Congressional Budget Office, a higher minimum wage can have two effects on the employment of low-wage workers: most of the low-wage workers who would receive a higher wage due to the federal minimum wage would also have a high income with some earning an income that would put the above the federal poverty standard while another effect is that some low-wage jobs would disappear and the income of the unemployed would decline
The long term effect of the income equality can affect the economic growth of the country. This might also affect the education level and the lifespan of the people of the country. The income gap suppresses the economic growth as well as the job creation which makes the recovery of the country not so visible. The education level of the people of the country is also affected by the increase in the inequality of the income and this eventually affects the economic growth and the development of the country. The social life and the conditions of the people are also affected by the rise in the income inequality of the people of the country (Hargreaves,
Classical or real-wage unemployment occurs when real wages for a job are set above the market-clearing level, causing the number of job-seekers to exceed the number of vacancies. Many economists have argued that unemployment increases with increased governmental regulation. For example, minimum wage laws raise the cost of some low-skill laborers above market equilibrium, resulting in increased unemployment as people who wish to work at the going rate cannot (as the new and higher enforced wage is now greater than the value of their labor). Laws restricting layoffs may make businesses less likely to hire in the first place, as hiring becomes more risky. However, this argument overly simplifies the relationship between wage rates and unemployment,
A large economic inequality gap implies that the poverty levels are quite high and this implies that the country’s ability to provide amenities like health, education and security are crippled and this may eventually create economic burdens to the country. Acquired power shuffles among the rich can weaken tax policies in favor of the rich, thereby leading to low tax return collection and minimal funding of the economy due to lack of government revenue (Corak, 2013). Government Initiatives to Lower Economic Inequality a) Progressive taxation – governments and local authorities should tax the wealthy proportionally higher as compared to the poor and this will help to minimize the income inequality amount within the cities (Autor, 2014). b) Product subsidization or nationalization – by lowering the cost of basic services and goods such as healthcare, housing and food enables the government to effectively enhance the poor people’s purchasing power in the society (Autor, 2014). c) Public education – by providing affordable education systems to the society helps to increase the skilled labor force supply and thereby minimizing the income inequality brought about by the differentials in education (Autor, 2014).
Besides the restructuring of economy towards private sector in Pakistan during the last few years, there is a high competition for jobs in public sector and public sector jobs are still more lucrative because of higher salaries, flexible timings, good working conditions and excellent fringe benefits. 2.2 Concept and Definitions 2.2.1 Level of
This is because, private sectors functions as a major tools for the growth of Malaysian economy, (Ragayah, 2008). According to Xavier, & Ahmad, (2011), as a developing country Malaysia is not capable to compete with high value-added economies. The progress of Malaysia is far behind in research and development compared to its rivals. Although many economic policies have been taken, yet income inequality still gets broader. The author criticizes that this can be due to wage growth that has not been maintained together with the economy growth in Malaysia.
Many firms With the increases of organization in an industry, it is relatively difficult for an organization to organize, communicate and successfully collude. The lower the concentration of organizations in the market, the lower the incentives for the firms to collude; the organization in a market that is lowly concentrated shall have a tendency of colluding since the profits are evenly distrusted amongst the many firms. 2. Lack of industry price leader Price leadership is a situation whether the price and the changes in the prices are usually established by the leading firm or a firm that accepted by the others (Peng 228). Hence, other organization within the industry follows and adopts the industry.