Question

Please answer the following inequality questions

a. What is the difference between wage inequality, income inequality, and wealth inequality?

b. Most U.S. policies that target income inequality either target it at the low end of the income distribution by trying to increase wages of low-income workers, or at the high end of the income distribution by limiting wages of high-income workers. In your opinion, should the government focus on the low end or the high end?

Answer 1

a) Wage inequality is one of the cause of income inequality. When different people are paid different wages for their services, it gives birth to wage inequality. The wages earned by an unskilled worker and a doctor are obviously different. Salaries of computer engineers, teachers, doctors, lawyer, clerical staff, drivers, cleaning staff varies a great deal.

Income inequality is mainly caused by unearned income which includes income from property and entrepreneurship. A person having many houses may gt huge rental income. A person having shares of many companies may gt huge dividend. This income inequality gives birth to wealth inequality.

Wealth inequality means that there is a wide gap in the assets held by different individuals. There are people who live in a rented house, there are people who are having more than hundreds of houses. If we look at standards maintained by richest people of the world and miserable conditions in which poorest section of the world lives, we can get an idea of wealth inequality and impact that it has. Situation is worse in developing countries where poor see their kids dying due to lack of medical facilities and rich can afford affluent standard even for their dogs.

b) I think government should focus on low end because higher salaries act as an incentive to work harder and being innovative. If we limit wages on high end, then there will be lack of motivation to put better efforts and be more effcient.