Thursday, June 12, 2014

What can be done about rising income inequality?

Income inequality is a widespread problem. The two U.S. jurisdictions with the worst inequality are Manhattan and a rural Native American reservation in North Dakota, which President Obama will visit on Friday. Six of 10 of the most unequal counties are in the South, and so are 18 of the top 25, Jake Grovum writes for Stateline. To see an interactive version of the county-by-county map of income equality below, click here.

Inequality affects different places in different ways, and one issue that seems to be nationwide is a decline in economic mobility. A report last year by the Pew Charitable Trusts said 43 percent of Americans who grew up in the bottom of the income scale stay there as adults, and almost 75 percent never reach the middle.

Also the issue has become more of a concern for the general public. A Pew Research Center survey showed that 65 percent of Americans think inequality is growing. While 90 percent of Democrats participating in the poll though there was "a lot" or "some" actions the government could take to solve the inequality problem, 50 percent of Republicans said there was "not much" or "nothing" the government could do about it.

"Our economic divide has become so stark, inequality is so off the historical wall, it's almost forced itself on the country's attention," said Sam Pizzigati of the Institute for Policy Studies, a liberal think tank. "It's become so stark that it can't be ignored anymore."

This problem has served as the impetus for many state proposals this year, Grovum reports. Some people worry that the measures focus too much on regulating executive pay and will not directly help those who need it. "Inequality has distracted attention from the bottom, where it needs to be," said Alan Reynolds, a senior fellow at the libertarian Cato Institute.

Two California Senate Democrats proposed "tying the state's corporate income tax to CEO-worker pay equity, setting up a sliding scale whereby a company's tax bill would decrease if the gap between executive and worker pay was smaller," Grovum writes. The measure would've decreased the corporate tax rate for companies in which the CEO makes less than 100 times what the media worker makes at the company. Though the bill failed its first floor vote, its two authors are trying to keep it alive.

This year, minimum-wage increases are a popular idea among Democrats for addressing inequality. Though Seattle plans to increase minimum wage to $15 an hour by 2017 and other states will increase their rates, "Obama's call for Congress to do the same has gone nowhere," Grovum reports. In some places, Democrats and Republicans have both supported wage increase, and even some Republican-leaning states like Arkansas, Alaska and South Dakota have increase on their fall ballots.

The economy is slowly recovering from the Great Recession, and lawmakers in some states have cut back on the safety net because of concerns that if the government is too helpful, workers may not as quickly re-enter the workforce. "Creating good jobs, they say, is the best way to address inequality," Grovum writes.

"Rather than focusing on inequality, it's how do we actually help the poor and help individuals in need?" asked Rachel Sheffield of the conservative Heritage Foundation. "If we look at our policies from our welfare system they don't promote that, they don't promote work and self-sufficiency. Our welfare system has failed to do that." Some states have decided not to continue waivers from the federal government to allow their citizens to receive food stamps without meeting particular work requirements. "The moves were cast as welfare reform to push people back into the workforce," Grovum writes.

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