Essay Sample on Wealth Inequality: A Global Menace with No Easy Solutions

Introduction

Wealth inequality has been soaring globally for many decades, even though some nations have implemented economic policies that have substantially reduced poverty (Kochhar and Fry, 2014, pp. 121-145). Notably, there have been persistent economic gaps in different countries where few individuals continue to amass wealth to the detriment of a large proportion of the population. The problem of wealth inequality continues to bedevil even the developed countries where they cannot find the best strategy to curb the rising wealth inequality (Ward, 2014, pp. 613-635). Understandably, high net worth individuals have accumulated such wealth by subjecting people to work for poor wages. In the contemporary world, wealth inequality has been attributed to the skewness in the share of wealth where a negligible percentage continue to hold massive wealth. Also, the middle class across the globe have been experiencing varied economic difficulties, and this has effectively crippled their asset base, thereby contributing to global wealth inequality. The paper seeks to explore the different reasons behind the soaring wealth inequality across the globe and the evidence for wealth inequality in Australia. Also, the paper will identify critical concepts and approaches in political economy that gives insight on wealth inequality as well as their justifications.

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Inflation

Many countries often use distinct methods, particularly in the measuring of inflation which has contributed to the ever-rising wealth inequality (Kochhar and Fry, 2014, pp. 121-145). In the last decades, the money supply has been on the upward trend, and many countries often track the daily prices of consumer goods to come up with interest rates. The Consumer Price Index (CPI) that is used by some countries to measure inflation always fails to consider the financial assets and properties where a large proportion of newly created funds end up and this often leads to a runaway price increase (Summers, 2014, pp. 65-73). Inflation has always been a major economic issue where the poor majority often fails to buy goods in the market, and this contributes to the soaring wealth inequality.

Government Subsidy and Interest Rate Policies

While government subsidy is viewed to be beneficial to the recipients of the goodies, many countries often fail to consider the resultant cost and consequences of the subsidy (Yellen, 2016, pp. 44-59). For example, government subsidy aimed at reducing the cost of housing may be intended to benefit the house-buyers, but in actual sense, the building companies are always the beneficiaries. Notably, government subsidy on housing has contributed to the rising house prices, which further locks a vast majority from enjoying the subsidy. Worse still, subsidies, however well-intentioned, often creates distinctive interest groups who continue to champion for more subsidies and this often widens the wealth inequality. Suppressed interest rates always result in reduced cost of debt, and the elite and large corporations are always the beneficiaries of cheap debts (Stiglitz, 2015, pp. 425-448). It is worth noting that low interest rates encourage more debts, and this often causes the asset prices to rise, which is then experienced by every individual in the country, which ultimately results to wealth inequality.

Income Tax and Decline in the Purchasing Power

The taxation system has been a major problem in most countries where the poor majority earning low wages are subjected to the taxation system that makes them worse-off compared to ultra-rich individuals in the country. Evidence has pointed to the fact that the elite often derives their massive wealth from the increased prices of their large companies, bonds and real estates that in most cases evade the porous taxation systems maintained by many countries (Jackson and Victor, 2016, pp. 206-219). Income tax policies that penalize the vast majority has resulted in increased productivity and hence, the increase in wealth inequality. The purchasing power has substantially fallen at an average rate of 5% annually, and this has not been matched by increased wages which therefore creates a huge erosion of wealth especially for individuals who greatly rely on their salaries (Gornick and Jantti, 2014, pp. 145-173). Empirical evidence has indicated that wealth is not necessarily created by efficient reallocation and redistribution of wealth in the country but rather through the adoption of proper monetary policies to plug the wealth gap.

Evidence for Wealth Inequality in Australia

In the recent past, Australia has been grappling with wealth inequality where evidence has shown that 20% of the Wealthiest individuals own close to a third of the overall wealth (Wilkins, 2015, pp. 93-102). There has been unequal sharing f wealth in Australia, where the elite 20% own more than 80% of the investment and shares the wealth. Moreover, Australia is composed of a substantial number of high net worth individuals, and the estimates of 2017 indicate that close to 3000 Australians own more than $US50 million of the country's wealth (Fenna and Tapper, 2015, pp. 393-411). It is imperative to note that special circumstances have contributed immensely to the wealth inequality in Australia. For instance, the unemployed individuals, single parents, and older people often lack economic leverage to amass wealth compared to the elite, and this is the main reason where there have been rising wealth inequality. Notably, income growth has been on a downward trend in the last few decades in Australia, where there has been a paltry $44 increase on the weekly household income in the financial year 2017-18 (Norton et al., 2014, pp. 339-351).

Individual Attributes Approach

The income distribution is the distribution across people. More significantly, the developed capitalist groups, the economic conditions, and the prize for people are attained majorly through employment opportunities and paid jobs (Ravallion, 2014, pp. 551-555). The individual attribute approach on inequality focuses on the process through which people obtain motivational, cultural, and educational resources which ultimately influence the achievement of the labor market. The concept focuses on individuals, but it is not individualistic. For instance, many researchers have demonstrated a variety of social factors which plays a critical role in transforming such individual market volumes (Jaumotte, Lall and Papageorgiou, 2013, pp. 271-309). Such factors include children practices, gender and racial discrimination, and neighborhood features, among other social factors.

According to this approach, the social factors are the ideal reasons to explain both economic status and inequalities in income, and such factors do not work directly through income distribution, but through attributes of people's inequalities (Kawachi and Subramanian, 2014, pp. 126). In the justification of this approach, individual character influences the way people carry out their role and how they pursue things in society. If people perceive the idea that income should be equally distributed without gender or racial discrimination, then that would reduce inequality (Cowell and Van Kerm, 2015, pp. 671-710).

Structural Approach

The structural approach to inequality stipulates that, however, the people's attribute and the effort may determine who get position; they do not concentrate on how to distribute such positions. The distribution of income is not a simple task, but it is a complex task since it includes the process of job creation with different degrees of rewarding (Kawachi and Subramanian, 2014, pp. 126). Among other aspects of processes, the most important thing is that it focuses on the methodology of power exercise within the institutions which create jobs, as well as regulating jobs. The notion that most CEOs in bigger companies around the world, earn hundred times that of a mere employee, for instance, fundamentally reflect the mandate and the authority of the CEOs in setting their salaries through co-operating with the board of directors (Killewald, Pfeffer and Schachner, 2017, pp. 379-404). The erotic work timetable and the shakiness of employment especially in the food companies reveal the weakness of regulations and the unions at the workplace, as well as the resulting authority of the leaders to set their timetable.

The diversion of the important academic jobs from a proper functioning authority to shaking positions reveals the shifting of power dealings. Additionally, the contemporary disappearance of a big number of middle-income jobs shows that capital has shifted around the world in capitalize on the benefits of the shareholders instead of the employee's well-being (Ward, 2014, pp. 613-635). There is variation in the power structure, especially in the capitalist economies with time and region. More imperatively, the creation of job opportunities with specific features such as remuneration, security, and career prospects critically depends on the balancing of power among the labor, capitalists, and the state. But they all influence the power relation. The state regulations also impact on the wages, overtime at work, job security, and aspects. Globalization also destabilizes the negotiating power of the unions in rectifying the inequality problem (Kawachi and Subramanian, 2014, pp. 126). To justify the concept, most leaders in different organizations act superior in determining wages for the workers without applying the principle of equal income distribution, thereby creating economic disparity.

Inequality and Class

In the gradational aspect of the class, the classes are usually perceived as the stairs in the ladder where they are portrayed as above or below. Classes are categorized into upper, lower, middle, lower-middle and the underclass. The contemporary concept on the decrease in the middle class prompts a political demand on the middle-class tax reduction (Gornick and Jantti, 2014, pp. 145-173). As the attribute explains how people end up in the income distribution, it also explains people's class. On the other hand, the structural perspective correlates to the relational idea of class. In this perspective, the classes are determined in a social relation, and not arbitrary divided in a continuum from the lower to the upper, but they receive names from social relation which bring them together.

Conclusion

Wealth inequality is a global phenomenon ranging from poor distribution of resources to inequality in political positions and power. Wealth inequality is contributed by factors such as the decline in the purchasing power of money, income tax, poor distribution of resources, and inflation, among other factors. Different approaches have been used in determining wealth inequality among people; for example, individual attribute approach concentrate on the characters and the way people perceive issues to influence wealth inequality. The concept focuses on issues such as gender discrimination and racial discrimination. Again structural approach concentrates on the power of an individual to influence income distribution such as positions at work, as well as political power positions. More significantly, equality is possible through the following; giving worker their voice, taxing the rich to help the poor, increasing the minimum wage, and breaking down the social barriers.

References

Cowell, F.A. and Van Kerm, P., 2015. Wealth inequality: A survey. Journal of Economic Surveys, 29(4), pp.671-710.

Fenna, A. and Tapper, A., 2015. Economic inequality in Australia: A reassessment. Australian Journal of Political Science, 50(3), pp.393-411.

Gornick, J.C. and Jantti, M. eds., 2014. Income inequality: Economic disparities and the middle class in affluent countries. Stanford University Press, pp. 145-173.