Introduction

Income encompasses revenue streams ranging from salaries, wages, interests, dividends, rent, and profits among others. The varying nature of how these streams operate has resulted in income inequality affecting the entire globe. Some inequality is inevitable, and to some extent, it is even desirable. This is an aspect that makes capitalism to work effectively. However, inequality becomes a problem when the middle class gets very little of the economic pie. This is because the aspect affects the lives of many people, and the economy in general since the middle class are the major consumers in the market. The gap between the rich and the others in the United States has been increasing remarkably in the last 30 years. Currently, the top 1% in the United States enjoy more than 20% of all the country’s income (Heathcote et al., 2010). Given this increased share, other people have begun to get lesser with time. There are many aspects that result to the prevalence of inequality. There is a need for the relevant authorities to instigate some policies that would help to contain the widening income gap due to the negative economic impacts that are likely to accrue.

Causes of the Inequality

In the documentary “Inequality for all,” Reich has outlined several factors that have played a significant role in extending inequality. Among the causes that have been mentioned are globalization and technology. According to Reich, these two elements have contributed significantly to the loss of jobs. They have their advantages, but they have worked well as wage reducers too. The pressure in financial institutions such as Wall Street that requires profits to be kept high at all times necessitates the slashing of income that employees receive. A moment in the film that shows this aspect quite well is Nancy Rasmussen sentiments. She is a working wife and sobs on the camera as she narrates how she received a $12 an hour wage cut. “If you have millions of dollars, why do you need that little bit that I have?” Globalization and technology also work in a similar fashion. As a result of globalization, access to cheap labor has become easy. This has resulted in employees accepting low incomes or get lay-offs altogether. Technology, on the other hand, has resulted in people losing jobs since their positions tend o become redundant. Work that can be done by around 50 employees becomes achievable by use of a single machine and employers usually prefer the latter option (Heathcote et al., 2010). Losing jobs results to a reduction of income by the middle-class and an increase in profits to the elite employers.

Reich also believes that the government has contributed significantly to the increasing inequality. For decades, under both Democrats and Republicans, the highest tax rate did not dip below 70%. In the film, Nick Hanauer asserts that he pays 11% tax while earning a six figure income. To some extent, he thinks that he would even be better off if he was taxed more. This is because the tax burden that is left on the middle-class earners would be reduced while shifting to the elite. The middle class would be left with more money that would be used for consumption purposes.

Reich believes that the growth of the economy has also contributed to the increased inequality. Since the 1970s, there has been increased deregulation of the markets. This aspect has helped the economy to boom exponentially.  However, very little wealth is getting the chance of trickling down. This makes the rich to continue immersing more wealth compared to the other people in the economy.

Access to higher education has also played a huge role in the increasing income gap. Since the 1970s, tuition fees in the United States have been increasing significantly. This aspect has made it difficult for students coming from families with low incomes to progress further with their education (Violante, 2012). As a result, their prospect of earning higher wages is curtailed by this fact. Students coming from well-off families take the initiative of attaining the highest possible education levels hence end up earning more money compared to the majority that do not get such opportunities.

Internal Dynamics

The internal dynamics in the United States contribute significantly to the increasing inequality being experienced. Among these internal dynamics is the CEO pay. Currently, the CEOs compensation is around 190 times more than that of the average workers (Brueggemann, 2012). This is something that Reich has clearly highlighted in the film. CEOs tend to allocate themselves very high wage packages hence making the gap between them and the average workers so big.

Homelessness is also an issue that contributes to the aspect of inequality. More than 750,000 Americans are homeless at any given night, while one in five is considered as being chronically homeless (Saez & Zucman, 2016). Such an individual’s chances of commanding a favorable income are extremely low at all times.

Education wage premium also affects the prospects of the country reducing the inequality aspect. Since 1979, it is only college graduates that have experienced a growth in their median weekly earnings (in real terms). By contrast, high school dropouts have seen their median weekly earnings decline by around 22% (Brueggemann, 2012).

Gender pay gaps and occupational sex segregation have also played a role in steering inequality. For the better part of the 20th century, the average woman earned around 60% of what the man was making (Violante, 2012). However, this has improved with time. Men and women also tend to work in different occupations. Overall, “men’s” jobs are usually paid better compared to “women’s” jobs.

Racial discrimination also affects the prevalence of inequality. In this time and age, it would be easy to think that this is not something that should be bringing major obstacles in the country. In the job market, the issue usually emerges while people are applying for jobs. Names that sound in a particular way are preferred than others depending on the affiliation of the recruiter (Bonilla-Silva, 2010). This practice blocks many people from earning a decent wage even when they deserve.

Deregulation of the labor market plays a role in promoting inequality too. Since the 1970s, the percentage of salary and wage workers that are union members has decreased. The decline has been experienced both in the private and public sector. As the union membership has been declining, the real value of the minimum wage has been declining too. This is something that is likely to enhance inequality.

Effects of Rising Inequality

Reich reiterates that the rising inequality in the United States has varied effects in different areas. To begin with, the rising inequality will work in affecting family structures in a negative way. This is one thing that middle-class families have had to do to cope with stagnating wages. Increased inequality will mean that the elite continues to earn more income while the middle-class citizens continue to experience stagnation in their income levels. In order to cope with this aspect, middle-class families have been forced to ensure that there is the existence of dual-income (Violante, 2012). This means that both parents in the family are working and the concept of stay at home dads and moms is being phased out as a result.

According to Reich, the persistence of the inequality is also likely to affect American’s borrowing habits (debt) and housing prospects. As the interview with Deborah and Moises Frias has shown, most Americans are finding it difficult to save given the income levels and the expenditures at hand. This means that most people do not have the ability to take care of expenditures that require huge lump sum amounts or prospecting investments. The only option available for such people is taking out loans. It becomes tough for people to get out of these debts since it is the only way they can use to move forward. People have turned to using their homes as collateral through home equity loans (Saez & Zucman, 2016). At some point, the payment of these loans is not feasible hence they end up losing their homes.

Rising inequality also has an effect on the country’s economy. Reich interviewed Nick Hanauer who is a venture capitalist, and the aspect was clearly illuminated at this point. Hanauer’s family initial business involves the manufacturing of pillows. His annual income is between $10 million and $30 million. Hanauer asserts that despite having a substantial amount of income, he cannot purchase 1,000 pillows. The rich individuals also sleep with one or two pillows. However, if such income was distributed among several individuals, more pillows would be purchased. In the United States, consumer spending amounts to 70% of the economy. The middle-class buyers are the real job creators. This is because they develop a market for the goods and services that are in offer (Bonilla-Silva, 2010). The increasing inequality will mean that more money will be in the hands of the few while the majority is left with something that is not sufficient. This will reduce the spending ability of the middle-class. Given that these are the people driving the economy, it will be affected negatively and remain stagnant as a result.

The film has also shows that increasing inequality also has an effect on poverty. This statistic is disturbing since it shows that 42% of Americans that are born into poverty will not have a chance of coming out of it. This is due to the lack of structures and resources that are deemed necessary to do so.  The increasing inflation also has an effect on the types of jobs that people are taking. There is an increased predisposition for people to seek employment in areas where they would work for longer hours or take more than one job to supplement the income deficit.

Opinion Regarding Reich’s Arguments

I agree with Reich’s arguments with regards to the inequality in the United States.  Globalization has been mentioned among the causes of the income inequality. The big companies have developed the tendency of outsourcing jobs to less developed countries with the objective of taking advantage of cheap labor (Saez & Zucman, 2016). This aspect tends to take away income generating activities for the middle-class in the United States hence reducing the amount of income available. This helps in extending the income gap since the top level officials in these organizations continue to enjoy their incomes; even at elevated levels due to increased profits as a result of reduced operational costs.

Reich’s assertion of the government’s contribution to inequality is also on point. The current US tax code has several loopholes that make it easy for the rich to pay less tax compared to the middle class. There will be a need to repeal the tax system to ensure that the tax burden is not more on the middle-class than it is on the rich. The increasing tuition fees for higher education are also playing a huge role in increasing the inequality gap. Many middle-class families are discovering it difficult to afford the fees as they are at the moment. As a result, lack of higher education is subjecting people to only earning the minimum wage hence increasing the inequality (Bonilla-Silva, 2010).

Conclusion

Inequality has been persistent in the United States for a long time now. In the film “Inequality for all,” Reich asserts that some inequality is inevitable, and to some extent, it is even desirable since it makes capitalism to work effectively. According to Reich, causes of inequality include globalization and technology, the government, growth of the economy and access to higher education. Internal dynamics in the United States such as high CEO pay, homelessness, education wage premium, gender pay gaps, occupation sex segregation, racial discrimination and deregulation of the labor market have contributed to the increasing inequality. The effects of the increasing inequality tend to bring more negative implications compared to the positive ones.

In the quest to reduce the extent to which inequality has engulfed the country, there will be a need for all the stakeholders involved to work in partnership. The government ought to streamline various sectors such as higher education and health insurance to ensure that even low-income earners can afford them. This would help them in moving forward. Repealing the current tax laws would also go a long way in ensuring that the middle-class citizens do not bear the unnecessary tax burden. There also ought to be stipulations on what CEOs in organizations should be earning. There should be a threshold of the percentage wage that they should receive taking into consideration what the average workers are earning. This would work as an incentive for the CEOs to improve the incomes of the average workers.

References

Bonilla-Silva, E. (2010). Racism without racists:Color-blind Racism and the Persistence of Racial Inequality in the United States (1st ed.). Lanham: Rowman & Littlefield Publishers.

Brueggemann, J. (2012). Inequality in the United States: A Reader (1st ed.). Boston: Allyn & Bacon.

Heathcote, J., Perri, F., & Violante, G. (2010). Unequal we stand: An empirical analysis of economic inequality in the United States, 1967–2006. Review Of Economic Dynamics, 13(1), 15-51.

Saez, E., & Zucman, G. (2016). Wealth Inequality in the United States since 1913: Evidence from Capitalized Income Tax Data. The Quarterly Journal Of Economics, 131(2), 519-578.

Violante, G. (2012). The Macroeconomic Implications of Rising Wage Inequality in the United States. Journal Of Political Economy, 118(4), 681-722.

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