Income inequality is a subject that most social science majors or people who deal with 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.” Recently, studies have shown that income inequality has many connections that have caused the gap in the United States. According to the research I found, income inequality is connected to corruption, trade, wages of workers, and education. The world income inequality had declined since the twentieth century according to the studies found (Clark). Corruption falls increasing on low income individuals more than higher income individuals. Additionally, the trade theory suggests that the free trade might have level up the income inequality higher within countries by the different patterns of wages and demand for workers who are skilled and unskilled (Silva and Leichenko). Moreover, the education of wealthier people has it easier because the learning efforts of education are unbalanced. Besides, income inequality in the United States is hurting our economy due to the all the issues of corruption, trade, wages, and education.
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 those on it than working offers them. This would encourage them to stay on the programs instead of getting a job. We took an in depth view of these ideas and formed a hypothesis of what causes income inequality,
Of the factors that our group pointed out in the above section we saw welfare as being one of the leading causes of income inequality. We originally believed that the programs' benefits offered more of a return than working offered the beneficiaries. So in reality if a person on welfare worked instead, they would be losing more benefits than they would be gaining in income. For Washington the truth is the exact opposite of what we perceived. Before we can examine the welfare system we need to look at other factors such as the poverty percentage rates, minimum wage laws, and the poverty line. "I 1997 Washington State was tied with Michigan having 11.2% of its population living in poverty.” This figure seems high unless it is compared to the United States average of "13.6%” Actually Michigan and Washington tied for the 17th lowest. The state that finished first with the lowest poverty rate is New Hampshire with "6.9%” The state with the highest poverty rate is New Mexico with "24%”
Another factor with which we must look at before we can examine the welfare system is minimum wage. That means every employee is guaranteed to be paid a certain wage, and no employer can pay them under the stated amount. It is important to explore this because "a ten percent increase in minimum wage causes a one to three percent increase in unemployment in teenage workers and a one percent increase in unemployment in young workers ages 20 to 24.” This important to know because in 1996 the federal government increased the minimum wage from $4.25 to $5.15. This is an increase in the minimum wage caused an increase of 4% in unemployment in teenagers and young adults. Washington State has increased its minimum wage to "$6.72 as of January 1, 2001.” This in theory has increased the unemployment of teenagers and young adults by about 3 for each group over the last five years.
The last factor that needs to be considered before one can look at the welfare program is the poverty line. For a single person living in Washington the poverty threshold is "$8,959” For a married couple the threshold is "$11,531.” If a family has two children it is "17,463.” This is vital because it sets boundaries on how much income must be earned by a household not to be considered poverty stricken. This figure is interesting because a single person working twenty-six hours per work making minimum wage in Washington State is number three.