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The Upside of Income Inequality Becker and Murphy Summary

Essay Instructions:

Please read the two articles I attach to this order. Please critique the strengths and weaknesses of each argument and provide an opinion at the end along with any questions you feel were unanswered by the articles. Please use two additional, quality references.


 


#1


The Rich Get Richer
Growing income disparity doesn't presage a new labor movement at home — but it may signal more terrorism for us abroad. James Kurth
In 1914, Henry Ford paid his factory workers $5 a day, twice the going rate, with the aim of creating a broad middle class able to buy the cars they were building. Today, that project isn't faring so well: The Economist reports that in the U.S. "the gap between rich and poor is bigger than in any other advanced country." And it's growing. According to the Congressional Budget Office, from 1979 to 2001, the after-tax income of the top 1 percent of U.S. households soared 139 percent, while the income of the middle fifth rose only 17 percent and the income of the poorest fifth climbed just 9 percent. Last year American CEOs earned 262 times the average wage of their workers—up tenfold from 1970....


 


#2


The Upside of Income Inequality
By Gary S. Becker and Kevin M. Murphy From the May/June 2007 Issue
Filed under: Economic Policy, Public Square
Much of the widening gap in incomes reflects the rising payoff for a college education and other skills. Rising payoffs are a development that the authors, economists who have won the Nobel Prize and the Clark Prize, call 'beneficial and desirable.'
Income inequality in China substantially widened, particularly between households in the city and the countryside, after China began its rapid rate of economic development around 1980. The average urban resident now makes 3.2 times as much as the average rural resident, and among city dwellers alone, the top 10 percent makes 9.2 times as much as the bottom 10 percent.[1] But at the same time that inequality rose, the number of Chinese who live in poverty fell—from 260 million in 1978 to 42 million in 1998.[2] Despite the widening gap in incomes, rapid economic development dramatically improved the lives of China's poor.
Politicians and many others in the United States have recently grown concerned that earnings inequality has increased among Americans. But as the example of China—or India, for that matter—illustrates, the rise in inequality does not occur in a vacuum. In the case of China and India, the rise in inequality came along with an acceleration of economic growth that raised the standard of living for both the rich and the poor. In the United States, the rise in inequality accompanied a rise in the payoff to education and other skills. We believe that the rise in returns on investments in human capital is beneficial and desirable, and policies designed to deal with inequality must take account of its cause....

Essay Sample Content Preview:

Income Inequality
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Introduction
Income inequality is the basic idea that relates to the difference that exist between the income that that the rich get and that of the poor. This article deliberates on the sensitive issues that surround the inequality with respect to the benefits and the demise that is has caused.
Arguments
According to Becker and Murphy (2007) in the article the upside of the income inequality, there are more benefits to derived from the inequality that the demise resultant. A closer look into the article reveals that there are several strengths as there are weaknesses in the argument. In the article the authors believe that the rapid economic development that is the reason that there is a widening income gap in the population. China is one of the countries that has embraced the idea of the rapid economic development and has reaped the benefits with more people in the population raising their economic power. One of the main strong points of the paper is the way it relates the economic development and the level of education in the population. The idea behind the influence that education has on the economy relates to the fact that, the governments such as the America’s has orchestrated high returns on education. This means that those that are more educated get better pay as compared t those that drop out of high school (Becker & Murphy, 2007).
The strength in this argument really comes out when the authors relate the aspects of the return on the other capitals to that of the human capital. With the high education, most of the educated lot offer precise strategies in improving the economy through managing the other aspect of the capital such as financial and physical capital. It also implies that there is an increase in the living standards of the people across gender lines and race. This means that regardless of the race or the gender type, if one seeks to improve their educational status, they are ultimately going to be rewarded with better pay and an improved standard of living. They also extend the benefits to the economy, given that with the increased education they are going to improve the efficiency of the economic ventures across the country and abroad. This aspect is reined in by the fact that better educations equates to better services and products with reference to the economic and technological innovations. The article also highlights on the fact that it could be said that the investment on education is self defeating given that less than half of those that join the colleges clear, while the number of African-Americans and Hispanics that drop from school remains constant. Apparently, those that drop out of high school do not get the chance to gain the non cognitive skills that are required in the formal sector (Hiltzik, 2014). The idea of introducing the progressive tax in order to cash in on those that make more money is retrogressive to the economy.
The...
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