How Did We Get Here?
The Fed policies instituted since 2008 to combat the recession have contributed to the dilemma. By injecting massive and unprecedented liquidity in to the system to pick up the slack of reduced money velocity, the widening gap has been one unintended consequence of the Fed's actions. With the elimination of jobs to maintain profit margins, attrition due to technology, and the perceived lack of demand, US companies are not providing the jobs required to support a growing middle class. It is this growth that would mitigate some of the growing disparity between the wealthy and the rest of society. As a result, the injection of liquidity has found its way in to assets that are held mostly by the wealthy. This actually was intended. The desired result was a "wealth effect" that would stimulate the economy and start the "virtuous cycle" that would raise all boats. Unfortunately, this does not appear to have taken hold as of yet. There are certainly indications that economic activity has perked up and to no small part due to fatter stock portfolios and stronger balance sheets. However, this has not caused the uptick in hiring that is really needed to drive the economy higher.
Some Thoughts and Ideas to Combat the Gap
The easy answer and most widely discussed and applied approach is the tax approach. Tax higher income earners at a higher rate and apply those monies to social programs. There is no empirical evidence that shows higher earners will be dissuaded from earning more as they pay more in taxes. They simply earn what they earn and will keep as much of it as they can. Taxing passive income at higher rates is another tax approach that, in theory, hits the wealthy more as they own the majority of assets that produce passive income. Some example of these are rental properties, stocks and bonds, and other financial assets.
But taxing has proven to not be the best or most effective way to "spread the wealth" amongst the different groups in our social strata. There must be better ways to reallocate a portion of the wealth created in this country and around the globe, as this is truly a global issue. Bill Gates and George Soros can serve as examples of individuals who have taken a stand against social issues such as poverty, health care and education. We can use these folks as exemplar figures to be emulated. An organization like the Bill and Melinda Gates Foundation is a good example of something to be emulated and replicated on a global scale. The effort in this case could be to provide the education, training and hands-on experience that many citizens lack to achieve employment and become self reliant and productive members of a thriving economy. Employment agencies both public and private exist but are not sufficient or effective enough for one reason or another. The weakness of public run agencies is the overwhelming need and inadequate resources to provide help. The weakness of private agencies is the profit incentive creates an obstacle from all parties getting a "fair shake" when trying to get assistance. Directing philanthropic efforts towards employment in addition to the traditional philanthropic goals could help mitigate the growing gap.
On the other side of the equation are the corporations and companies doing the hiring. They need additional incentive to hire. Corporations cannot and will not hire just to hire from a philanthropic perspective. They exist to make profits for their shareholders, they do not exist to create jobs for the sake of creating jobs. Labor is typically the largest cost component companies have. Some mechanism must exist to incentivize, or at least mitigate, the cost companies carry when confronted with the prospect of hiring additional staff. Economic uncertainty is a large obstacle companies face when considering when and how much additional staff to put on the payroll. Offering tax incentives for hiring domestically instead of overseas would help domestic economies and have the stimulative impact of improving the condition of consumers locally. The loss of these tax incentives for local governments could be offset by higher income taxes of the newly hired and creates a win-win solution.
The best, most productive and effective way to combat the growing income and wealth gap is to create more jobs and get the most important resource we have, the human resource, back to work. Simply taking money away from the wealthy and just giving it to the less prosperous is not the answer. There needs to exist a stimulative byproduct of the distribution of wealth.
Some Thoughts and Ideas to Combat the Gap
The easy answer and most widely discussed and applied approach is the tax approach. Tax higher income earners at a higher rate and apply those monies to social programs. There is no empirical evidence that shows higher earners will be dissuaded from earning more as they pay more in taxes. They simply earn what they earn and will keep as much of it as they can. Taxing passive income at higher rates is another tax approach that, in theory, hits the wealthy more as they own the majority of assets that produce passive income. Some example of these are rental properties, stocks and bonds, and other financial assets.
But taxing has proven to not be the best or most effective way to "spread the wealth" amongst the different groups in our social strata. There must be better ways to reallocate a portion of the wealth created in this country and around the globe, as this is truly a global issue. Bill Gates and George Soros can serve as examples of individuals who have taken a stand against social issues such as poverty, health care and education. We can use these folks as exemplar figures to be emulated. An organization like the Bill and Melinda Gates Foundation is a good example of something to be emulated and replicated on a global scale. The effort in this case could be to provide the education, training and hands-on experience that many citizens lack to achieve employment and become self reliant and productive members of a thriving economy. Employment agencies both public and private exist but are not sufficient or effective enough for one reason or another. The weakness of public run agencies is the overwhelming need and inadequate resources to provide help. The weakness of private agencies is the profit incentive creates an obstacle from all parties getting a "fair shake" when trying to get assistance. Directing philanthropic efforts towards employment in addition to the traditional philanthropic goals could help mitigate the growing gap.
On the other side of the equation are the corporations and companies doing the hiring. They need additional incentive to hire. Corporations cannot and will not hire just to hire from a philanthropic perspective. They exist to make profits for their shareholders, they do not exist to create jobs for the sake of creating jobs. Labor is typically the largest cost component companies have. Some mechanism must exist to incentivize, or at least mitigate, the cost companies carry when confronted with the prospect of hiring additional staff. Economic uncertainty is a large obstacle companies face when considering when and how much additional staff to put on the payroll. Offering tax incentives for hiring domestically instead of overseas would help domestic economies and have the stimulative impact of improving the condition of consumers locally. The loss of these tax incentives for local governments could be offset by higher income taxes of the newly hired and creates a win-win solution.
The best, most productive and effective way to combat the growing income and wealth gap is to create more jobs and get the most important resource we have, the human resource, back to work. Simply taking money away from the wealthy and just giving it to the less prosperous is not the answer. There needs to exist a stimulative byproduct of the distribution of wealth.
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