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Income Inequality

Policies to Combat Inequality

Possible policies to combat inequality focus on countering identified factors contributing to the rise of the problem.

While recent increases in income inequality, especially in the United States, are discouraging, it is necessary to understand the counterargument that income inequality is an unavoidable effect of capitalism. Public policy may reduce income inequality with solutions focused on reversing inequality's rise, closing economic differences between subgroups, and enhancing overall economic mobility, which is the movement of individuals from one economic level to another. Possible solutions for each identified cause of income inequality exist. When considering these solutions, it's important to keep in mind that income inequality has always existed, but the main issue is the fact that the income and wealth gap has increased.

One proposed solution for income inequality driven by the rise in demand for highly educated, highly skilled workers is to increase training and education opportunities. Making it easier for those who are less likely to attain higher education to do so through various public policies and programs lowers the hurdle created by such disparities. Broadening the ability of workers to receive the training and education that employers demand allows workers to get better-paying jobs, thereby narrowing the inequality gap.

A possible solution to inequalities driven by globalization (the increasing interaction of people across the world through the growth of the international flow of money and trade) and offshoring might be to attempt to regulate companies moving operations and jobs out of the country; however, this may not be an optimal policy, as creating blockages in the flow of the global money supply introduces inefficiencies into the global economy. For example, adding a tariff to a manufacturing company for offshore production would encourage the company to produce locally. However, this could impact the efficiency of the corporation if it chooses to relocate because it takes time and resources to bring production back from overseas. A more viable solution when considering the loss of goods, services, and jobs to globalization and trade is to focus on making the country's exports more competitive by exporting a highly desired commodity, such as electronics or oil.

Policy- and institution-created income inequality can be combated by reversing the effects of prior problematic policies. Changes can entail making it easier to unionize (where employees of a company or industry form a collective labor organization), in an effort to decrease the number of working poor and increase wages for the lowest-paid workers. Factories that are unionized often successfully bargain for higher wages or benefits that can help workers' finances, such as health insurance. These responses, combined with focusing on a policy of full-time rather than part-time employment, work to address increased inequality and declining wages.
The percentage of part-time employment increased from 16.6% of total employment to 20.1% during the Great Recession while the percentage of full-time employment decreased from 83.4% to 79.9%. This increase in part-time jobs, which tend to not include benefits such as health insurance, has exacerbated the already existing income disparity in the US. When workers cannot find full-time employment, their overall income goes down.
The impact of money on politics has also been a rallying cry for change. Often, laws are tilted toward corporate interests who make financial contributions to political candidates and hire lobbyists. There have been recent proposals to curb these acts by corporate interests, but they have not had widespread success in the United States. Often, politicians are lobbied to make decisions that would help corporations profit but would not guarantee any benefit for lower-wage workers.