This paper addresses the inequality of wealth in the American economy today. It is evident in America that there is a problem with wealth distribution. From the tax wages to minimum wage, there seems to be a common scenario of rich vs. poor or white vs. person of color. As race, gender, residence, and class come into play here, it should be addressed and fixed by the government in order to better the general welfare. The topic I have chosen for my policy paper is economic inequality. Not only is this a large problem throughout the United States, but it discriminates against certain people. The policy proposed later in this essay is an adjustment to the federal minimum wage. Government must take action by raising the minimum wage. By raising the minimum wage, the amount of people living in a state of poverty would go down, the economy would be benefited, and the way people live could be changed for the better.
The top 1 percent of American households earned an average of $1.26 million in 2014; the bottom 90 percent got an average of $33,068. And since 1965, income inequality has worsened: The ratio of CEO pay to worker wages skyrocketed from 20-to-1 to 303-to-1 in 2014 (Divine). This data shows how unequal money is being distributed to hard-working Americans. The ratio of CEO to an average worker of their company is 303 to 1, which is ridiculous. There is an obvious problem in America that is in need of immediate action. In order to address the issue of economic inequality government must raise minimum wage.
If the government were to address economic inequality and face it, then there would not be the amount of poverty in America that there is today. The recent growth of economic inequality in recent years has caused people to focus on the causes and consequences of these changes. Several analysts have argued that inequality does not base all the attention it has been receiving; stating that the focus on inequality can divert attention from the real problem, which is poverty. According to the University of California Davis’ Center for Poverty Research,
The official poverty rate is 12.3 percent, based on the U.S. Census Bureau’s 2017 estimates. That year, an estimated 39.7 million Americans lived in poverty making the poverty rate 13.9 percent. (Semega) Nearly 40 million people in America were living in a state of poverty last year. In 2017, there was also roughly 500,00 homeless people living in various shelters, abandoned homes, and on the streets. One of the reasons people become homeless is because they simply cannot afford the housing for the area in which they live in. Since 2007, the number of poor households increased by 27%?—?11.25 million families are paying 50% or more of their income toward housing. (HandUp)
According to The Department of Housing and Urban Development, families with only one full-time worker making minimum wage could not afford rent for a two-bedroom market-priced apartment anywhere in the country. If people are becoming homeless because they cannot afford to pay for their housing, then should the government not make sure people are making enough money in order to not be living on the streets? Even though the federal minimum wage has been raised depending on city or state, it still has not been raised from $7.25 an hour in 2009 (Doyle). People have advocated for better conditions and yet men and women higher up in congress have not changed anything. Many people across America are advocating for the “#fightforfifteen.” This is the campaign for the federal minimum wage to be raised from $7.25 to $15.00.
As of April 2017, the fight for fifteen is beginning to be processed and looked upon by Senators Bernie Sanders (I-Vt.) and Patty Murray (D-Wash.), and Republicans Bobby Scott (D-Va.) and Keith Ellison (D-Minn.) Raising the minimum to $15 in 2024 would directly or indirectly lift wages for 41.5 million workers, 29.2 percent of the wage-earning workforce. (Cooper) By raising the hourly rate of work by almost double what the federal minimum wage is today, millions of people could be taken out of poverty. This would not just bring people out of poverty, but the general welfare of those 41.5 million workers would be benefited greatly. A counter-claim to raising the minimum wage is that it could increase the unemployment rates. If the minimum wage were to be raised to $15.00 an hour, this could lead to employers not being able to afford to keep the amount of staff they previously had with a lower minimum wage rate. This could lead to many people being laid off and evidently not just being unemployed, but unfortunately becoming homeless.
Raising the minimum wage could boost the economy for the better. Recent experience in cities that have raised their minimum wages provides further support. For example, San Francisco increased its minimum wage to $12.25, and experienced positive job growth in the leisure and hospitality industry the following year. Raising the minimum wage increases consumer spending and boosts the economy. A study by Doug Hall and David Cooper estimated that a $2.55 increase in the minimum wage would increase the earnings of low-wage workers by $40 billion and result in a significant increase in GDP and employment. (Scott)
A raise in the minimum wage benefits low-wage workers, specifically those most likely to put additional income directly back into the economy, which can start a recurring cycle of greater demand for goods, services, job growth, and increased productivity. Business executives support a higher minimum wage. A survey conducted by Republican pollster Frank Luntz that was leaked to the Washington Post in April found that 80 percent of business executives supported increasing the minimum wage. (Scott) Why? These business executives want the minimum wage to increase so they can see profit from their own companies.
This is because giving people more money to spend through raising their hourly pay, will give them more money to spend. It has been obvious within the past couple of years that small family owned businesses have been closing due to lack of profit. However, small business owners do in fact support a higher minimum wage. A national poll of small business owners conducted by the American Sustainable Business Council found that 60 percent of small business owners support increasing the federal minimum wage. (Scott) Over the phase-in period of the increases, the rising wage floor would generate $144 billion in additional wages, which would ripple out to the families of these workers and their communities. (Copper)
Because lower-paid workers spend much of their extra earnings, this injection of wages would help stimulate the economy and spur greater business activity and job growth. Giving people this extra money in their pocket to spend would also encourage them to work harder when they are at work, because they feel like they are being paid the amount they are worth. This could lead to the improvement of businesses because their workers are putting in more effort into their jobs. Their is an argument that if the minimum wage rises, it will cause inflation. It is stated that corporations will raise prices in order to recuperate their profits that were lost from the increase of the cost of production, in this case, the increase of the minimum wage. Because employers will have to spend more money on their employees, they will just increase the prices to make it up.
The way people go about their everyday lives could change significantly if the minimum wage were to rise. Many people who have minimum wage paying jobs did not receive the best education he or she could have gotten. Typically minimum wage jobs have employees with the highest degree being a high school diploma. With families in need of expenses especially single mothers or fathers living off of minimum wage, it is important they make enough money to provide for not only themselves, but whoever else they are responsible for in their household.
The cost of housing and childcare for families with children exceeds all other expenses. In the United States, a typical family of four (two working adults, two children) spends 21% of their after-tax income on childcare and another 20% on housing. (Nadeau) Faced with tradeoffs, a second working adult in a family with two children must earn at least $11,224 on average in order to cover the costs of childcare and other increased expenses when they enter the workforce. Single-parent families need to work almost twice as much as families with two working adults to earn the living wage. A single-mother with two children earning the federal minimum wage of $7.25 per hour needs to work 139 hours per week, more hours than there are in a 5-day week, to earn a living wage (Nadeau).
These statistics are horrifying. To think that a mother would have to work so hard for her children to have the best possible lives that she would never be able to see them because she is constantly working is upsetting. $7.25 an hour is not enough money for one to raise a child. Of course it is possible, but it would be the worst scenario possible. For example, if a single mother were to be raising her newborn child and was working at McDonald’s for minimum wage how would she be able to support not only herself but a child. A box of pampers Diapers cost roughly 23-35 dollars. If she is only making 7.25 an hour how would she be able to support her child when she cannot even afford to pay for diapers? Four out of every 10 single parents who work (40.8 percent) would receive higher pay, including 44.6 percent of working single mothers. In all, 4.5 million single parents would benefit, accounting for 10.8 percent of those who would be affected by raising the minimum wage (Cooper).
It is hard to imagine that this is a very large problem involving single-parent lifestyles and how minimum wage plays a huge role in that. Luckily raising the minimum wage would give these single-parents more money to take care of expenses they deem necessary in order to support their families. A counterargument to the federal minimum wage going up would be an increase in the level of high school dropouts. If kids realize they can make enough money to sustain themselves in life, they might begin to think education is useless. They will not want to put in the work in high school to attend a nice college, which would lead to a well-paying job, when they could just leave school and get a decent job making good money at 15 dollars an hour.
The issue of economic inequality can be solved by raising the minimum wage. By doing so, millions of people will be taken out of poverty. Not only will they be above the poverty level, but many homeless people who were affected from unaffordable housing may be able to pay for rent now that they are paid a higher hourly rate. If the minimum wage were to rise, there would be more money for people to spend, which means more business for many companies across America. This would effectively boost the economy. Increasing the minimum wage would also change the lives of millions of people, especially single mothers and fathers.
The general welfare is stated to be the concern of the government for the health, peace, morality, and safety of its citizens. Making sure the welfare of the general public is healthy and strong, is a basic goal of government. Raising the minimum wage from $7.25 to $15.00 would definitely promote the general welfare of the American people. It would reassure people the the government wants them to succeed in life and by doing so they are granting these hard working men and women the money they deserve to live a happy and healthy life. For the future of the change of minimum wage, it is being shown that the federal minimum wage will be changed from $7.25 to $12.20 in 2020 to eventually $15.00 in 2024. However, some implications that could arise from raising thee wages would be inflation, unemployment rates rising, and high school dropout rates increasing as well.
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