How Might We Implement Economic Reform To Close the Growing Wealth Gap?

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To understand the Wealth Gap, let’s look at the following steps: 

1. Imagine all of America’s wealth (about 76 trillion USD) as a pie cut into fourths. 
2.  the wealthiest 10% holds about 70 trillion of that 76 trillion so they would get 3 of those 4 pieces. 
3. The lower class only holds 2 trillion of the original 76 trillion, so they would only get a sliver of the remaining piece. 

How is this fair?

The Wealth Gap: Then and Today

The Problem In History

Problems first arose…

following the southern defeat in the Civil War. The South’s loss meant the abolition of slavery and therefore a movement away from an agricultural economy. Meanwhile, the Union underwent a massive industrial transformation. This newfound industrial strength opened up many new job opportunities, which ultimately caused an uptick in immigration. Unfortunately, these immigrants, along with other skilled and unskilled native-born American laborers were exploited by capital-hungry factory owners (such as John D. Rockefeller depicted below) who cared more about profit than the wellbeing of their workers. Laborers worked upwards of 10 hours each day only to receive scant tiny food rations, wage cuts, crowded housing, and virtually no regulations to protect them while the industrialists who employed above them got wealthier and wealthier (”The Gilded Age”). In fact, by the end of the 19th century, the wealthiest 1% of industrialists held about 25% of America’s net worth. And despite slight dips and jumps in wealth distribution throughout the ensuing century, wealth division remained a huge problem. 
The problem today

One of the most notable factors keeping wealth inequality in place…

is federal tax policy, as it is skewed to favor the excessively wealthy. America’s wealthiest families receive substantial tax breaks, largely due to the treatment of capital gains, which taxes the profits from the sale of property or investments at a lower rate than workers’ wages. This special treatment of investment income only benefits those who have the financial resources to invest. As a result, not only does the top 1% pay less in taxes but those tax savings can be reinvested, leading to the accumulation of even greater wealth. Another contributor to the widening wealth gap is the stagnant minimum wage. The minimum wage has not been increased since 2009 and, according to the Bureau of Labor Statistics, the value of one dollar has decreased by almost 19% over the same time frame. In other words, the cost of living has risen substantially while wages have not kept pace, making it increasingly difficult for low-wage workers to make ends meet and putting many into poverty. This severely limits the upward mobility of minimum-wage workers and therefore contributes to wealth division.  


Let’s Make a Change!

The top 1% ‘s median income is growing at an unprecedented rate, and if we wait too long to initiate reform, wealth concentration will have already become so disproportionate that it will be nearly impossible to fix. So, what can we do?

What can be done on the federal level?

First and foremost, we need to increase the minimum wage. Studies estimate that an increase in wages for lowest-paid workers could benefit almost 5 million people and add roughly $2 billion to the country’s overall income (Adams, 1). Fortunately, this is already in the works, as Biden plans to pass an executive order to raise the federal minimum wage to $15 an hour by 2025.

Once we have established a more livable minimum wage, we need to begin thinking about reforms to our federal tax code. Specifically, we need to address the inequity created by the capital gains tax treatment. The current policy on capital gains puts more value on income earned through investments than income earned through work. And because much of the top 1% ‘s wealth is attained through investments, they benefit substantially from this policy while the lower class lacks the financial means to invest and are therefore excluded from those benefits. To fix this, we need to dramatically reduce the tax discount on capital gains by requiring individuals to pay the same rates on investment income and wages.


What can be done on the personal level?

One of the most effective ways to promote economic equality is to stop putting all of our money into already large enterprises and start investing in under-represented people and communities. Netflix, for example, has invested about $120 million dollars in under-resourced colleges, specifically Historically Black Colleges (Jackson, 1). This investment will have a lifelong impact on the schools and their students. So, when faced with the option to purchase a product from a trillion-dollar enterprise such as Amazon, or a local small business, I always choose the latter. 

At the same time, I encourage everyone to donate to organizations fighting against income inequality. Strike Debt, for example, is a “movement of debt resistors” who have eradicated roughly 1.8 billion dollars in debt since 2015. They do this by buying debt off of families in need and therefore need significant funds to keep their project in operation. So, donating $10 annually would help keep the organization running, which would be impactful in closing the wealth gap. And, if you are from the Bay Area like I am, you can actually volunteer with Strike Debt’s Bay Area team! 

I also think we must work within our own communities to lift up those who are most hurt by economic inequality. In the Bay Area, for example, we have a homeless population of just under 30,000. And although I alone could not provide permanent housing or drastically improve their economic conditions, I have made it a mission of mine to alleviate some of their struggles through an organization a friend and I are currently founding. We plan to provide resources such as educational books, warm clothing, food, and toys to homeless children throughout our county. Throughout this planning process, however, we have learned that sustainable change takes time. Creating a concrete and viable action plan, especially during COVID has presented unexpected challenges, but we now know we need to stick with it to have our desired outcome. 


If you want to learn more, check out this TED Talk by Dr. Jan Tobochnik!


Works Cited

Original Essays



Student at Head-Royce School, Oakland, CA USA

1 comment

  1. Hey Lily!
    This is such a great project! Before visiting your page, I was of course aware of the wealth gap, but I wouldn’t have been able to identify the precise reasons why it exists. Your page was very easy to read and informative, and I feel as if I now understand the problem so much better than I did before. I also appreciated the steps you included about what could be done to help fight the problem; I’ve recently been trying to use Amazon less, and I will continue to make more of an effort to do so because of what I’ve learned.
    Good job! 🙂

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