Wei-Yu (Wendi) Chan

PoliSci1 - AmGov
J. Williams
MWF 11-12

Essay #2 - Income Inequality and the

Economic Crisis in Our Lives

The gap between the rich

and poor has never been greater than it is now. The United States has the largest
income disparity gap and lowest savings rate of any industrialized country in
the world; the higher one’s
income is, the more one would save. According to The Huffington Post, Ben Bernanke, the
Federal Reserve Chairman,
believes that the growing income inequality is “creating two societies” in the
United States. However, he thinks it is because of educational differences –
college graduates have a lower percentage of unemployment and high school
students have a higher percentage of unemployment and thus leading to an
unequal society. However, according to researchers from Boston Federal Reserve,
the main reason for lower savings rate is linked to the rising costs of health
care and other involuntary costs (Collins 19), which adds on to people’s
financial difficulty, which in turn shows a clearer picture of the economic
crisis. The wealth gap between races is also significantly huge, namely between
the Mexicans, Asians and whites (Course Reader 140).
Chuck Collins’s Economic
Apartheid In America: A Primer on Economic Inequality & Insecurity discussed that income
inequality undermines the
securities of families, threatens democratic institutions, is bad for public
health and contributes to the breakdown in social cohesion (Collins 14). Many
people now are losing their jobs or have already lost their jobs. Research
shows that the temporary and part-time workers make up the greatest percentage
of the workforce. Already the greatest percentage, the number of temporary
workers is still increasing, and often times they would have to take on two or
three jobs just to pay off their bills. Also, the cost of attending college has
risen and “higher education is becoming more class-segregated than it was a
decade ago” (Collins 20). Income inequality is also bad for the economy because
as the rich gets richer, the poor becomes poorer than they already are and
therefore distorts the economy. With increase in all sorts of costs, and the
poor becoming poorer, there will be people who can afford basic needs and
people who can afford luxurious items; the demand for goods and services shifts
and prices might increase because the rich are hopefully spending more (which
will aide the economy) but prices might also decrease because majority of the
people cannot afford to spend at all.
The labor of the under-skilled workers is less valued, and many companies are expecting them
to upgrade their skills, in order for the supply
of skilled workers to catch up with the demand (Collins 65). As people’s income
rises, their health improves. Research showed that the gap between the rich
and poor in any region is a better indicator
of public health than poverty rate. Communities with less inequality and high
poverty rate, have lower infant mortality rate, longer life expectancy and less
violent trauma as compared to places with less poverty rate with high
inequality, and thus are healthier places to live in (Collins 29). This
fragmentation of unequal distribution is leading to more social breakdown and
violence, ultimately resulting in poorer public health.
Collins also believes
some of the drivers of this income inequality to be the rise in corporate
power, the decline in the power of the workers, and the declining independence
of the politics. Tom Woodruff, Executive Vice President of SEIU, agrees that
the declining power of workers is a driver. “The ‘mainstream’ economics agenda
becomes the agenda of big corporations and large owners of capital. This agenda
includes cutting capital gains taxes, privatization of public services,
deregulating corporations, loosening environmental restrictions, and opening up
international markets for trade with no consideration for human rights or
environmental standards” (Collins 87). Taxation, tax cuts for the wealthy,
regulation and deregulation, and government spending are also some of the
drivers of this inequality in the United States. Reaganomics and the
constantly improving technology are definitely among the important drivers.
Since Ronald Reagan became the president, national deficit increased
drastically and that was what initiated the current recession. He ran the
country as if it was a corporation; he also destroyed unions, many were thrown
out of work and so the remaining had to work double the time. Other possible
drivers are larger markets with lower tariff barriers, the individualist
American mindset, the outsourcing of labor, low labor costs due to advances in
technology, and fear techniques made by the media. The education difference put
the poor in at disadvantage. Those with higher education are able to have two
jobs whereas those who have low level of education are not able to find jobs
because it impedes their ability to earn. Government policies, instead
of improving the situation, further reinforced the wealth gap; if the gap is to
be closed, government policy will have to play an important role (Course Reader
141).
Mentioned in Collins’
book and Moore’s
film, plutocracy is another important driver. Plutocracy is defined as “a
government or state in which the wealthy rules” or “a class or group ruling, or
exercising power or influence by virtue of its wealth” in Websters Unabridged
Dictionary. Political scientists, Jacob Hacker (Yale University)
and Paul Pierson (UC Berkeley) strongly believe that the economic struggles are
driven by long series of policy changes by the plutocracy instead of advances
in technology or globalization. Corporate and financial sectors manipulate
government policies in their favor - from tax laws to deregulation to corporate
governance and then to safety net issues.
Often times the voters
serve as a check on policies, especially those that affect their economic
opportunities or increase the benefits of the rich. The unemployment rate hit
9.8% in November and has been over 9% for 19 months. 6.3 million people have
been officially out of work for six months and maybe longer. More than half of
the people who suffered a loss of wages reported to not being able to meet at
least one basic need. Since 2008, jobs were scarce and wages remained constant
if not declining. Everyone was worried about their jobs, especially in the
recent two years. However, President Obama and his counselors insist on extending
tax cuts for the wealthiest. “This was the cost of extending emergency
unemployment benefits for people who have reached the limit. This was the cost
of lowering payroll taxes in a bid to spur jobs” (Goodman).
“The richest 0.1 percent
of taxpayers would get a tax cut of $61,000 from President Obama” (Kristof).
The richer group received about 440 times as much as the poorer half earned.
The richest then take the money and buy bigger mansions and fancier cars
whereas the poor are taking up more loans trying to keep up with the society.
The polarization of the economy shatters the sense of national union, and
fosters political polarization. Also according to Kristof, more than ⅘ of the total increase in
American income went to the richest 1% from 1980-2005. Timothy Noah, from Slate
Magazine, thinks that the government should improve the education system
because the workforce is not meeting the educational requirement. He also
thinks voters should elect Demorats to the House because they are more
favorable to lower income. In Moore’s
film, George W. Bush said that capitalism is the best system that incorporated
greed, exploitation and failures, giving people the freedom to pick their jobs
and buy themselves products, therefore free market system is the way to go. But
look where we are now? People who should be getting their rightful amount of
wages are not receiving it and people who are not working as hard physically
are getting more than they need.
The inequality does not affect me as much as the economic crisis does. As an international
student, I am unable to work in the community and therefore I don’t receive any sort of income.
However, due to the economic crisis, prices of every little thing are rising, leading to inflation. In
economics terms, this is what we call cost-push inflation. Even though the US currency is
depreciating, it is still worth more than a Singapore dollar does and so things are more
expensive than they originally were after the price increased. Like the Moore’s film, Sicko,
people are already unable to pay for their
health care bills, let alone after the price increases, how do the companies
expect people to pay up their bills? When I was sick, I didn’t have the money
to even visit a general practitioner, let alone visit the hospital. The country
is having economic difficulties, and so are the bottom half of the country; the
people at the highest income level is sucking up America’s wealth like a vacuum
cleaner. The increase in costs for everything, health care, services, goods and
even education makes life difficult for me and everyone else who came from
around the world.
Also, this crisis is
affecting my education; besides the monetary effects, the economic
crisis also affect my education in other ways. Studying in a community college
is a cheaper alternative but the unemployed section
of the workforce are back to further their education and earn a higher degree.
The increase in the number of students and the state budget cuts for education
are making earning a college degree a very long process. Many students
now have difficulties registering for classes that they need because of the increased
demand for them due to increased number of students. There is a shortage in
classes and a surplus in students. When the economy
was better, there were lesser workers trying to upgrade their skills or earn a
higher degree. Now that the economy is bad and people cannot get jobs because
they don’t meet the education requirement, everyone is back in school.
Hopefully I can
successfully earn my Associates Degree in Child Development and continue
walking on the path of Education towards my dream of being a teacher. I know it
is difficult to register into classes that I am required to take, that is why I
am also taking interest classes every semester to make my college education a
fruitful one. If I’m good at a certain subject, I’m willing to tutor people.
However, I enjoy volunteering and so instead of tutoring as a job, I might just
tutor as an interest, that way people can save money and at the same time, I’ll
feel accomplished. My progress is simple. I don’t plan on working in relation
to politics or business or the economy. I am more concerned about the people
around me, whether or not they are living healthily, whether or not they need
help. In the current economy, I’m willing to volunteer at a Chinese school
every weekend as a teacher’s assistant. My progress is simple, and I hope the
people around me don’t hold too high expectations of the future as everything
is changing; nothing is constant.
My educational tools are
the life lessons I’ve learnt at my boarding school – frugality, compassion, joy
and giving, just to list a few. After my Government class in high school and
Political Science and Macroeconomics class, I’ve learnt to be politically
neutral. I may disagree with the government’s policies but they do have their
reasons for carrying out such actions. As for economic tools, as long as I
figure out how I’m going to pay off my basic needs, I am good to go. I believe
that money isn’t everything. Even in this crisis, one can still enjoy life.
Frugality should be everyone’s mantra, regardless if the economy is good.
Mastering that, whatever economic situation one is in, he or she wouldn’t have
to worry as much. Education is my passion. But if for some reason, I am unable
to finish my degree, I’ll self study. Practical skills are more important than
technical theories that we learn in class. Receiving a graduation certificate,
which is just a piece of paper, but not mastering the practical skill as well
is as good as not graduating college. In an economic crisis, there is really
not many ways people can live their lives. Everyone spends lesser than they
usually do. Since my goal is to help other people, whether as a teacher or as a
counselor or as a friend in need, I’m willing to
help. I don’t need educational requirements to help others in such terms. My
sociable side might coincidentally be a counselor to people in my life. There
are many ways to go around whatever obstacles that come my way. There is no one
tactic or tool I would use to reach my goal, in fact, I would have to use a
combination of what I have learnt throughout the years and put them all into realistic
and practical use – not every skill can be learned from the textbook and those
skills will pull you through in hardships like this economic crisis.

Citations
Ortenzi, T.J. “Ben Bernanke: Income
Inequality Is Creating ‘Two Societies’” The Huffington
Post. The Huffington Post. Dec 6, 2010. Web. Dec 13,
2010. <http://www.huffingtonpost.com/2010/12/06/ben-bernanke-income-inequality-
_n_792579.html>

Collins, Chuck and Felice Yeskel. Economic

Apartheid In America:
A Primer on Economic
Inequality & Insecurity. New York: The New Press, 2005. Print.

Herbert, Bob. “Fast Track to Inequality”. The New York Times. The New York Times. Nov 1,
2010. Web. Dec 13th, 2010.
<http://www.nytimes.com/2010/11/02/opinion/02herbert.html?_r=4&hp>

Capitalism: A Love Story. Dir. Michael Moore." Overture Films,

Paramount Vantage: 2009,
DVD. Dec 2010.
Goodman, Peter S. “Middle Class Strife Left
Out of Conversation”. The
Huffington Post. The
Huffington Post. Dec 12, 2010. Web. Dec 14th 2010
<http://www.huffingtonpost.com/2010/12/14/middle-class-strife-left-_n_796196.html>

Kristof, Nicholas D. “Our Banana Republic”. The

New York Times. The New
York Times. Nov
6, 2010. Web. Dec 14, 2010.
<http://www.nytimes.com/2010/11/07/opinion/07kristof.html>

Johnston, David Cay. “The Gap Between Rich and Poor Grows In The United States”. The New
York Times. The New York Times. Mar 29, 2009. Web. Dec 14,
2010.
<http://www.nytimes.com/2007/03/29/business/worldbusiness/29iht-income.4.5075504.html>

“The United States of Inequality”. New America Foundation. Slate Magazine. Nov 1, 2010. Web.
Dec 14, 2010.
<http://www.newamerica.net/events/2010/united_states_of_inequality>