Income gap has ramifications beyond the bank account

Story written by Heeu Millie Kim.

Graphic by Millie Kim.

Graphic by Millie Kim.

COLUMBIA — The income gap among U.S. residents can be represented by a group of 100 people: From 1979 to 2012, the five people with the largest incomes got a raise of 75 percent. But the five with the smallest incomes lost 12 percent of their income.

This analysis from U.S. Census data and the Institute for Policy Studies, a Washington D.C. think tank, shows an imbalance of income between people of different economic levels.

In the U.S., the top 1 percent averages an income 30 times greater than the bottom 99 percent averages. In Missouri, that same top 1 percent of income-earners averages 24 times more, according to the Economic Policy Institute, a nonprofit organization that conducts research on working America.

This gap can prompt middle and lower-income residents to reach out to services offered by government-funded or nonprofit organizations.

MU junior Tyler Hessler is the director of Tiger Pantry, an organization that provides food assistance and educational resources to the MU community. Hessler, 20, and a biology major, said he has observed unequal distribution of income and its affects in Columbia.

“Just looking around campus, a lot of resources go to the upper-class portion of people,” Hessler said. “Not everyone has to earn the same wage but having a better curve would mean more people in the middle and less people on the outside. Right now we have a lot of lower-class people and a few upper-class people, and that curve is just not big enough in the middle. If we can lower the wages of some of the upper class who are being paid ridiculous amounts, we can average the curve out for everyone else.”

MU Economics professor Saku Aura also believes that there barely is a tangible middle class.

“People have kind of killed their view of middle class,” said Aura, in an interview with Cover Your Gap, a website guide created by MU students for journalists to better cover economic inequality.

Aura believes that there is a problem with income inequality because some people have more access to economic resources than others.

“That’s a traditional (reason) why we care,” he said. “You care about people in poverty.”

Another fundamental reason why society cares, Aura said, is the political idea that higher-income individuals have significantly more influence in society and are inclined to make decisions that benefit people of high income.

“We have had quite a dramatic change in income distribution over the last 30 years, and you might argue that has led to guilty political processes along the way,” he said.

Lower-income workers earn less over time, according to a report by the U.S. Congressional Budget Office, a nonpartisan agency that conducts objective analysis for the U.S. Congress.

“In 1979, the bottom 80 percent of the population … received nearly 60 percent of total labor income, about 33 percent of income from capital and business, and about 8 percent from capital gains,” the CBO’s report said. “By 2007, the share of labor income going to the bottom 80 percent had dropped to less than 50 percent, their percentage of business income and income from capital had decreased to 20 percent, and their share of capital gains was about 5 percent.”

This polarizing trend has continued over time, and the income gap will most likely widen.

Bruce D. Bartholow, a MU psychology professor, said that income inequality could hurt society socially as well.

“There are a lot of social problems that stem from having huge income inequality — not only in terms of having a large group of low-income people, but also psychologically,” he said. “It perpetuates a prejudice and it perpetuates the idea that people are responsible for their own unjust outcome.”

Achieving equal wages is not a plausible solution to the problem of income inequality because people who have jobs that require education or a higher set of skills tend to earn more. However, every person’s ideal of income inequality can differ, depending on his or her socioeconomic status.

“There is absolutely a problem with too many low-income families,” said Connie Furlong, owner of Tiger Town Treasures, a Columbia thrift store. “There are soup kitchens, food pantries, and churches, but there is always a need. I think the government, in some way, should regulate where money goes to narrow the gap at least a little bit.”

Bartholow also thinks government intervention is necessary.

“The current level of income inequality is outrageous and unacceptable. The government and corporations should strive to reduce that income gap,” said Bartholow.

Aura suggests going after a more aggressive, progressive tax system, capital income, and corporate taxes, but he said, “Like it or not, there’s always going to be poverty in society.”

 

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