The American Dream is no longer attainable. The wealth gap creates too much division between the rich and poor making it impossible to get ahead. The representation of the top earners helps to show wealth is extremely skewed. “The wealth of the top 1% of wealth holders increased from 37.4% of total wealth in 1989 to 38.5% in 1995″ (Keister, Lisa. Annual Review of Sociology). In addition, the top wealth holders“owned almost 85% of total house wealth”creating even more division between the poor and wealthy (Keister, Lisa. Annual Review of Sociology). The question is why?
It is said that the correlation between income and wealth is weak and only tells part of the story. Part of this wealth gap can be seen with the reshaping neighborhoods. For example “the consequences of the growing divide between rich and working class are increasingly visible” (Knox, Noelle. USA Today). Part of the wealth gap can also be explained by the careers of the workforce.
In fact, “More than 80% of the workforce is employed in the four lowest-paying industries: construction, retail, agriculture and services” and with inflation, the income for these groups is decreasing (Knox, Noelle. USA Today). In order to decrease the wealth gap, taxing the rich more, increasing the minimum wage, and changing the corporate tax code, are ways to help diminish the gap and bring America back in hopes of allowing the American dream to be attainable.
A solution that can help decrease this gap could be taxing the rich. Democratic ideas state that one should “tax the rich more heavily when inequality is high” to help diminish this gap (Faircy, Christopher. Political Science Quarterly). Taxing the rich would help allow the rest of the country to catch up and be able to live a better life.
The rich have a large amount of income and simply cannot spend enough money to reinvest back into the country. The majority of this comes from the middle class. As the middle class is taxed usually more, they cannot reinvest back into the country. The unfortunate thing about the country is “that current government policies are heavily biased towards the rich” (Faircy, Christopher. Political Science Quarterly). However, the question is why? Since the rich cannot reinvest back into the economy, the bias should be towards the middle class. However, the change in taxing needs to come from the government which is a combination of political and economic shocks.
Another possible solution to look at is increasing the minimum wage to a living wage. The middle class is the largest contributor to the economy. If the middle class cannot afford to live off of their minimum wage, then they do not have excess income to reinvest back into the economy. “On the whole, the living wage measures that are assessed here did give rise to significant improvements in the standard of living of many low-paid workers” (King, J.E. Review of Political Economy).
As a democracy that depends on the citizens, the goal of the country is to have citizens that are happy. Part of that comes from increasing the standard of living. The amount of the work the wage earners put in, needs to correlate to their earnings. A rise in the minimum wage would allows wage earners to be able to save money instead of living paycheck to paycheck. By saving up with this increase in wage, the gap between the rich and the rest of the nation would decrease.
Now, some people feel the increase in minimum wage is in fact a detriment to fixing the wealth gap. “The Congressional Budget Office, which found that a $10.10 wage would reduce employment by 0.3 percent” (Covert, Bryce. Nation). Employers have found that higher wages actually reduces costly jobs. After looking at the minimum wage across the U.S. and the increase over 25 years shows that it had no effect on job creation for the unemployed. However, “economists like David Cooper, who found that a higher minimum wage would support the creation of 85,000 new jobs” (Covert, Bryce. Nation). In addition, the increase in wage could reduce employment, which would reduce the bonuses for higher paid employees. So, an increasing can help decrease the gap in income, but if not the best solution, there is another solutions to be further discussed.
An alternative solution compared to minimum wage increases is instead to fix the problem of the corporate tax code. It is unfortunate to see that some wealthy companies pay zero and others have to pay the full 35% of the code, showing how broken it is and a contributor to the gap. In order to decrease the gap, the code needs to be fixed and this can be done by making it less complex. “The code is hopelessly complex and subject to change through lobbying and political contributions” (USA Today). So, we must change and prevent loopholes to increase the tax on corporations to diminish the gap.
Profitable companies such as GE do not have to pay any taxes, which allows for money to be made, however, citizens and small corporations that are not as profitable are subject to paying the full 35 percent. In addition, consumers are forced to make up theses taxes by the price increase of items. The code can be fixed by making it clear to not allow loopholes to be made. Through this fix, Americans can hopefully decrease this increasing wealth gap.
The wealth gap in America is still a huge problem facing the nation. The “studies of wealth mobility suggest that upward movement is rare” and that income equality has deflated affecting the majority of the population (Keister, Lisa. Annual Review of Sociology). Possible ways to improve this gap can be seen through taxing the rich more to bring back to a diminished gap. Another possibility can be seen in increasing the minimum wage to bring more jobs to the country to increase the standard of living for low paid workers. Corporate tac code change can help to tax companies fairly to create less division between the wealthy and poor. Wealth has been one of the most important indicators of financial well-being and security, and the inequality in the distribution is destroying the nation. Through looking at the solutions, America can reach a place where wealth inequality is no longer unequal.