Poverty and Income Inequality

Introduction
In the past few decades, poverty and income inequality have become the most disturbing
economic issues of modern times. Understanding the phenomenon is essential for a policy
aiming to control or even reverse the trend. Equality in all aspects of society, including income
distribution, is a moral ideal. One issue is economic egalitarianism, which is a doctrine that
should guide money distribution to ensure that there no related inequalities. However, society in
modern times consists of people who live in luxury and earn huge sums of money, while others
live in abject poverty where it is even a struggle fulfilling their basic needs. Poverty and income
inequality raise basic ethical issues related to public compassion and fairness as people live in a
society where social stratification is too much. As such, further research is necessary to help
understand the origin of income inequality and poverty and help come up with solutions to the
problem. To promote inclusive growth; the minimum wage needs to be raised to ensure that the
working class is compensated adequately for the services they offer.
Background Information
Poverty and income inequality are two major human rights problems. Most residents
living in poverty in the United States have certain human rights that are out of reach. They may
lack access to quality health services, education, proper housing, safe working conditions, basic
sanitation, and even clean drinking water. Poverty also raises civic-related issues. For instance,
people may be unable to vindicate their rights in court due to poverty, or they may be unable to
participate in political life. Poor people may also experience discrimination or poor treatment due
to the status in society. Poverty may also be associated with unequal treatment and unfair debt

POVERTY AND INCOME INEQUALITY 3
burdens, especially because local governments rely on offender-fines to fund the criminal justice
system. The persistence of income inequality in the United States makes it difficult for the
government and society at large to address the problems associated with poverty.
The surge in income inequality is one of the most disturbing issues, both economically
and socially. It has generated more interest from policymakers and researchers to try and
understand the origin as well as possible ways to control the problem (Fargione et al., 2011).
Income inequality has been seen to cause instabilities on the social structure and on economies in
the country as well as other countries across the world. In the United States, income inequality
has steadily increased over the past three decades. Personal savings have also declined, and this
has been found to be one of the major causes of the surge in inequality. Income inequality is
positively correlated to wealth inequality (Fargione et al., 2011). This is because income from
labor is the major source of wealth. Despite the positive correlation, there are some instances
where wealth inequality differs significantly from income inequality. Wealth inequality may be
high, but income inequality is low.
Labor income is, in most households, the only source of income that people receive. The
rise in income inequality has affected growth in people’s living standards because wages are the
only primary source of income in these households. Over the past few decades, employees in
America have lost their collective bargaining power. Individual and collective bargaining power
has been lost because jobs are in high demand; most people would rather keep their jobs even if
the pay is not growing because they need the wages to meet daily needs (Ainous, 2018). the
erosion in individual and collective bargaining power has slowed down the overall growth of
wages in the recent past. An increase in wage inequality has led to an anemic growth of wages
for a high percentage of employees in the country. This phenomenon, combined with significant

POVERTY AND INCOME INEQUALITY 4
rises in wages for those at the top of the ladder, has left a majority of workers grappling with an
ever-shrinking portion of the total wage bill in the country.
The disparity in wages in the country has affected the distribution of wealth. Those at the
top continue earning high wages, and this is partly because their individual and collective
bargaining power still continues to rise. Their ability to purchase property, make investments,
and save has continued to rise. On the other hand, the vast majority of workers whose wages are
disproportionately low continue to experience a reduced ability to grow economically as the
standards of living continue to be affected (Ainous, 2018). These issues continue to lag
productivity for a vast majority of employees as their living standards continue being eroded.
Slow wage growth and income inequality have contributed significantly to poverty, and people’s
upward mobility is slowed regardless of the level of education.
Proposed Solutions
The issue with income inequality is that there is a big disparity between those at the top
of the ladder of income distribution and those at the bottom. Raising the minimum wage will
help reduce this gap (Romich & Hill, 2018). Those at the bottom of the income distribution will
earn more than they are receiving currently. If the minimum wage is raised, about seven million
people will receive a higher income, and they will be elevated from poverty (Litwin, 2015).
Raising the minimum wage will increase people’s purchasing power, and they will be able to
provide basic needs for their children. Also, since raising the minimum wage does not affect
those at the top of the income distribution, it will help reduce the gap between the two groups of
employees (U.S. Bureau of Labor Statistics, 2014). Besides, raising the minimum wage will not
only have a positive impact on poverty reduction, but it will also boost productivity, increase
income and thus help reduce income inequality in the country.

POVERTY AND INCOME INEQUALITY 5
Another solution to the rising income inequality and poverty problem is to have policies
that provide public goods. Education and health care take a significant portion of income earned.
Thus, if there were policies in place that availed these goods for free or at relatively subsidized
prices, then individuals will be able to spend a larger proportion of their incomes on other goods.
Further, other policies such as on redistribution of capital and land will ensure that citizens have
a relatively equal share of these resources (McCall et al., 2017). Such policies will help equalize
unearned income that people receive from wealth ownership. Such policies help indirectly
reducing income inequality and poverty. This is because these two go hand in hand. A rise in
income inequality leads to a rise in poverty. Thus, if policies that reduce income inequality were
to be put in place, then poverty would also reduce proportionately.
Evaluation of Evidence
The paper is founded on evidence that is valid, reliable and lacks bias. The paper relies on
peer-reviewed articles where the authors are experts in various fields. In evaluating the variety of
a source, one has to analyze the truthfulness of the source. One of the sources used was
published by the U.S. Bureau of Labor Statistics. The article analyzes various barriers that hinder
the breaking of the poverty chain. In the article, the author creates a model of eliminating poverty
by raising the minimum wage (U.S. Bureau of Labor Statistics, 2014). The article also analyzes
studies that have been done by other economists on the subject. In analyzing other studies, the
article enhances its validity as well as credibility. Past data on income inequality and poverty are
captured by the research. In the past, an increase in the minimum wage has proven to be effective
in reducing poverty (U.S. Bureau of Labor Statistics, 2014). Since it is a government publication,
it is unlikely that it contains any biases. The motivation behind the publication is to express the
facts as opposed to influencing policies.

POVERTY AND INCOME INEQUALITY 6
Another article that was relied on in the research is titled The Fight for a $15 Minimum
Wage in Saskatchewan. The article was written by Dr Andrew Stevens, a renowned economist
who is an Associate Professor in one of the leading universities located in Canada. The article
examines the effect of raising the minimum wage to 15 dollars per hour in Canada. The article
goes further to state that it is an effective way of ensuring that the number of people in poverty is
reduced (Stevens, 2017). The article carries an in-depth analysis of the situation in Canada with a
view of justifying why an increase in the minimum wage will help in addressing poverty and
income inequality. The article is peer-reviewed and is written by an expert in the field, and this
makes it a valid point of reference (Stevens, 2017). In my view, it is not biased and is not trying
to advocate for a particular point of view but rather to analyze the issue from both sides of the
debate.
An article titled Exposure to rising inequality shapes Americans’ opportunity beliefs and
policy support was also useful in suggesting another approach to the problem of income
inequality in America (McCall et al., 2017). The article analyzes the data drawn from
Congressional Budget Office.

POVERTY AND INCOME INEQUALITY 7

The use of statistical evidence helps ensure that the article’s validity is enhanced. In the
American economic system, the top 1 percent income earners have continued to report a growth
in their incomes while the people who fall in the lowest quartile fail to report any growth in their
earnings (McCall et al., 2017). The analysis of the data calls for urgent measures that should be
used to solve the income inequality. The article is objective about the problem and quotes
multiple sources to ascertain the position of the authors (McCall et al., 2017). The article is
therefore very objective and offers valid viewpoints on how the issue can be tackled.
Ethical Outcomes from the Proposed Solution
In raising the minimum wage, countries and business, people will be cushioning the most
vulnerable in society. The minimum wage in any economy is defined as the minimum amount of
remuneration that employees get from employers. A minimum wage is set in many countries that
are under International Labor Organization (ILO). Raising the minimum wage has always been

POVERTY AND INCOME INEQUALITY 8
opposed by various opponents (Sümer, 2018). However, with a just minimum wage, a just and
equitable share of wealth will be given to the poor, and this will help in eliminating poverty as
well as eliminating the high levels of inequality that are present in many countries. One of the
ethical considerations in raising the minimum wage is that it affects other wages, too (Sümer,
2018). When an increase in the wages is enforced on low-income earners, it becomes necessary
for the wage increase to affect other individuals in the various income brackets. The implication
is that an increase in minimum wage can affect the whole labor market.
While employers should bargain with employees in order to come up with a fair and
justified wage, companies make billions but pay very little to employees. Opponents of the
minimum wage have always argued that setting the minimum wage is in direct contradiction of
self-ownership and freedom of contract (Sümer, 2018). Employers and the government have an
ethical duty of ensuring that workers are not exploited. Justice and fairness in the labor market is
an important ethical consideration (Sümer, 2018). Each person must be given what they deserve.
The ultimate economic goal is to create a dignified and productive life. As a result, it is
important for companies to ensure that their dealings with employees are in line with the
principles of social justice. Distributive justice calls on companies to ensure that they pay the
employees well and, in so doing, create a fair environment. A raise in the least amount of
remuneration paid to workers is the best way of ensuring that companies distribute earnings to
employees.
Conclusion
Overall, poverty affects the quality of life that people live. In the United States, income
inequality contributes greatly to poverty. The major issue is that the wage gap between the poor
or those at the bottom of the income distribution continues to grow because nothing is done to

POVERTY AND INCOME INEQUALITY 9
specifically remedy the situation. This paper proposes that one of the ways through which the
problem of income inequality can be mitigated is through raising the minimum wage. This is a
solution because it will only affect those individuals at the bottom of the income distribution.
Further, the wage gap will be reduced, the poor will have better purchasing power and ability to
save, and poverty will reduce. There is also a need to put in place policies that help the poor
acquire public goods such as education and health care at a subsidized price so that their ability
to purchase other necessary goods is increased.

POVERTY AND INCOME INEQUALITY 10

References

Ainous, R. (2018). Macroeconomic, Income Inequality, and Poverty Relationship: A Review of
Research Perspectives. The Review of Black Political Economy, 45(2), 123-146.
Fargione, J. E., Lehman, C., & Polasky, S. (2011). Entrepreneurs, chance, and the deterministic
concentration of wealth. PloS one, 6(7), e20728.
Litwin, B. S. (2015). Determining the effect of the minimum wage on income inequality.
McCall, L., Burk, D., Laperrière, M., & Richeson, J. A. (2017). Exposure to rising inequality
shapes Americans’ opportunity beliefs and policy support. Proceedings of the National
Academy of Sciences, 114(36), 9593-9598.
Romich, J., & Hill, H. D. (2018). Coupling a federal minimum wage hike with public
investments to make work pay and reduce poverty. RSF: The Russell Sage Foundation
Journal of the Social Sciences, 4(3), 22-43.
Stevens, A. (2017). The fight for a $15 minimum wage in Saskatchewan. Canadian Centre for
Policy Alternatives.
Sümer, B. (2018). Minimum Wage as An Ethical Issue. European Journal of Multidisciplinary
Studies, 3(1), 26-35.
U.S. Bureau of Labor Statistics. (2014). Raising the Minimum Wage Effect on Poverty.
https://www.bls.gov/opub/mlr/1990/07/art3full.pdf