3 thoughts on “Policy Options Brief on Income Inequality (Jake Kuhl, Jerin Choudhury, James Murphy, and Sanjida Sadeque”
In this paper, you identify several causes of income inequality: the globalization and outsourcing, skill-biased technological change, and immigration of less-educated workers. (You mainly discuss the undocumented immigrants. I doubt the undocumented immigrants only contribute a very small portion of the existing income inequality. In fact, the immigrations of less-educated workers in general should be a better argument.)
It is worth noted that companies in the private sector are profit maximizer in theory. They are not aiming at surviving just like nonprofit organizations. In the policy options, you mention that outsourcing should be limited. There is always a trade off in efficiency and equity. The U.S. is very unlikely to sacrifice the economic growth to limit the free trade as a means to save jobs for the less-skilled workers. Because when the economy collapses, factories will shut down and these less-skilled workers will lose their jobs sooner or later.
Let’s think in another way, instead of to limit the activities of employers and hurt our business community, why not offer better means-tested transfer programs to redistribute the resources to the poor? That is what the government should do but so far it is not doing a great job. I recommend you to consider Earned Income Tax Credit (EITC), this is the so-far most successful means-tested transfer programs, because it incentivize work. The Child Tax Credit (CTC) is another program you may want to look at.
The government can also offer better educational programs to help unemployed to be equipped with necessary skills, so that they can be a better fit in the U.S. labor market.
This policy options brief does bring up some good points. However, I felt that there was too much of an emphasis on illegal immigration, which doesn’t have much to do with the issue at hand. Also, this brief doesn’t bring up other factors that have contributed to the problem, such as changes to the tax code over time that have benefited the wealthy overall above everyone else.
Out of the policy options presented, I think that a combination of the first two would go the farthest in dealing with income inequality, as globalization and outsourcing are major factors in respect to this problem that should be addressed. However, other options (that aren’t presented here) should also be considered if one is to make serious progress in confronting income inequality, such as dealing with the tax code and having government invest in education, healthcare, and infrastructure, among other things.
I think the argument would be stronger if there was more data provided regarding the income gap over time. It would also be interesting to know what CEO salaries were like prior to 1980, when stock options reportedly became a bigger part of compensation packages. Ultimately this a strong and concise recitation of the claims that suggest income inequality is a major issue today. My personal opinion is that the problem is not so serious, and is more a consequence of low workforce participation and a lack of robust economic growth.
I also strongly disagree with the points about stock options. It is best for CEO pay to incentivize better performance through stock options. If we look at the ratio of CEO salary in cash to the median employee, the number drops dramatically and appears much more reasonable. The stock option is a separate matter, which reaffirms the firm’s fiduciary responsibility to shareholders, and benefits all who are invested in securities markets, especially institutional investors like union pension funds.
I am also concerned about any proposals to limit modernization and investment. We shouldn’t adopt a Luddite attitude towards automation, but rather focus on dramatically overhauling our education system to prepare people for a next generation workforce that will no longer include manufacturing in a large way. That would be the option I’d add, to overhaul US education from grades pre-K to 12.
Of the options provided I could most closely get behind the first, as there is no question that undocumented workers pull wages down. It is in their best interest, and those of all of Americans that we solve that problem.
In this paper, you identify several causes of income inequality: the globalization and outsourcing, skill-biased technological change, and immigration of less-educated workers. (You mainly discuss the undocumented immigrants. I doubt the undocumented immigrants only contribute a very small portion of the existing income inequality. In fact, the immigrations of less-educated workers in general should be a better argument.)
It is worth noted that companies in the private sector are profit maximizer in theory. They are not aiming at surviving just like nonprofit organizations. In the policy options, you mention that outsourcing should be limited. There is always a trade off in efficiency and equity. The U.S. is very unlikely to sacrifice the economic growth to limit the free trade as a means to save jobs for the less-skilled workers. Because when the economy collapses, factories will shut down and these less-skilled workers will lose their jobs sooner or later.
Let’s think in another way, instead of to limit the activities of employers and hurt our business community, why not offer better means-tested transfer programs to redistribute the resources to the poor? That is what the government should do but so far it is not doing a great job. I recommend you to consider Earned Income Tax Credit (EITC), this is the so-far most successful means-tested transfer programs, because it incentivize work. The Child Tax Credit (CTC) is another program you may want to look at.
The government can also offer better educational programs to help unemployed to be equipped with necessary skills, so that they can be a better fit in the U.S. labor market.
This policy options brief does bring up some good points. However, I felt that there was too much of an emphasis on illegal immigration, which doesn’t have much to do with the issue at hand. Also, this brief doesn’t bring up other factors that have contributed to the problem, such as changes to the tax code over time that have benefited the wealthy overall above everyone else.
Out of the policy options presented, I think that a combination of the first two would go the farthest in dealing with income inequality, as globalization and outsourcing are major factors in respect to this problem that should be addressed. However, other options (that aren’t presented here) should also be considered if one is to make serious progress in confronting income inequality, such as dealing with the tax code and having government invest in education, healthcare, and infrastructure, among other things.
I think the argument would be stronger if there was more data provided regarding the income gap over time. It would also be interesting to know what CEO salaries were like prior to 1980, when stock options reportedly became a bigger part of compensation packages. Ultimately this a strong and concise recitation of the claims that suggest income inequality is a major issue today. My personal opinion is that the problem is not so serious, and is more a consequence of low workforce participation and a lack of robust economic growth.
I also strongly disagree with the points about stock options. It is best for CEO pay to incentivize better performance through stock options. If we look at the ratio of CEO salary in cash to the median employee, the number drops dramatically and appears much more reasonable. The stock option is a separate matter, which reaffirms the firm’s fiduciary responsibility to shareholders, and benefits all who are invested in securities markets, especially institutional investors like union pension funds.
I am also concerned about any proposals to limit modernization and investment. We shouldn’t adopt a Luddite attitude towards automation, but rather focus on dramatically overhauling our education system to prepare people for a next generation workforce that will no longer include manufacturing in a large way. That would be the option I’d add, to overhaul US education from grades pre-K to 12.
Of the options provided I could most closely get behind the first, as there is no question that undocumented workers pull wages down. It is in their best interest, and those of all of Americans that we solve that problem.