Economic inequality, also referred to as the wealth gap, is a trend that is especially transparent in America as it continues to grow at a rapid rate. This can be summed up by the statement “the rich are getting richer.” While the top 1% are certainly making more now than they were decades ago, there is no significant fluctuation in average wage across the bottom 99%. However, because the standard of living is generally increasing in America, many low income residents are still not able to make enough to live a comfortable life. To compensate for this growing wealth gap, there are various strategies that government officials and business leaders are advocating for, an example being increasing taxes on the wealthy. Although a reasonable idea to initially plan out, government distributions are a mere band-aid on a larger problem that encompasses economic opportunity and unemployment.
My insights on this come after listening to the podcast After Hours, a channel run by three Harvard Business School professors: Youngme Moon, Mihir Desai, & Felix Oberholzer-Gee. In their episode “Reimagining Capitalism” with author Rebecca Henderson, they discuss how we can use the innovation, industry, and economic liberalism in a capitalistic society to our advantage, as opposed to taking our current system as opportunities to exploit labor and suppress small businesses. Before listening to this episode, I believed the wealth gap could be solved by aggressively taxing the rich and redistributing this money to the poor. However, as a student who learned about the extensive benefits of living in a capitalist society during her history class — the ability to fuel innovation, successful businesses, and target supply and demand — it felt contradictory to apply socialist methodology in our economy. And in fact, it is. To benefit from capitalism, our society must also solve impending problems such as these through a capitalist lens.
Although Moon, Desai, Oberholzer-Gee, and Henderson did not explicitly connect their conversation to the wealth gap, their main takeaway is that instead of focusing so much on passively giving out government distributions, we should prevent this increased spending on distributions in the first place through skill-based learning, high quality education, and increasing the reputation of all jobs. In my opinion, this is especially important to keep in mind when trying to better the quality of life for low-income families. By funding schools with beneficial courses and offering job counseling, it can ensure that they have the skills necessary to perform well in the workforce. Instead of spending millions of dollars on welfare to assist these families, allow them the opportunities to secure jobs and provide for themselves. This is not to say that welfare should not be funded at all; however, investing some of this funding on the root of this problem would ensure the government is making the most of what it does give out as welfare.
With this same mindset, we can make sure jobs are well-paid. Employment should be an aspect of their life that workers enjoy. One of the reasons some workers are so underpaid is because they work long hours under intense conditions but only get paid minimum wage (or less in some cases). If there were more workers in the workforce with the necessary skills, it would not only distribute how much work needs to be done but also grow the business so each worker would not have to work so much to get paid so little. The act of being employed would then be raised to a higher standard. As a result, industrialists would be less inclined to exploit their labor and be more inclined to pay their workers a deserving wage.
Understanding that the U.S. is a politically divided realm, it is important to compensate to each side of the political compass. In this case, we have tried to take a typical socialist stance on the wealth gap and increase taxes on high-income earners. Although we can tax more on these earners and use this money for government distributions, the wealth gap will persist despite doing so. It will be more fruitful to embrace the inevitable capitalist nature of American industries, not by reverting back to 19th century labor exploitation, but by getting rid of this exploitation by arming eligible workers with the skills necessary to succeed in the workforce.
Written by Helena Kwon
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