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3 quick and easy ways to reduce income and wealth disparities

June 10, 2016 - 12:00am
David Surdam
hundred dollar bills

There has been much unfavorable comment made about disparities in income and wealth in America. The irony is that the previous administration witnessed a decrease in the disparity of income and wealth, while the current administration, rhetoric aside, has experienced a marked increase in the disparity of these variables.

If we look at data regarding distribution of income by households, we can see ways to narrow the disparity. I offer my modest proposals.

First, we should mandate that college graduates marry high school dropouts. Most of our UNI students will marry other college graduates. Their households will typically earn well above the median income. If, instead, a college graduate marries a high school dropout, we are lifting one person from the lower rungs of the income distribution while keeping the college graduate from attaining an inordinately high household income.

Second, we should insist that highly-productive people work fewer hours. Households in the upper echelons of the income distribution typically work many more hours than folks in households in the lower ranks. True, college graduates usually make more per hour than high school graduates, but the disparity is amplified by the college graduates' penchant for putting in longer hours. This is especially true of students who receive professional degrees.

Third, we should engineer a stock market crash. Falling stock prices sharply diminish capital gains and thereby reduce disparities in income and wealth. The 2007-08 stock market rout cut both incomes and wealth holdings of the people in the upper reaches of the income and wealth distributions.

These tongue-in-cheek suggestions aside, individuals usually experience much fluctuation in their income and wealth holdings across their lifetimes. Many Americans reach their peak household incomes and wealth holdings in their 50s. For a few years, the household may reach the coveted or reviled "Top 1%" before falling. For households headed by a college graduate, chances are good that they will reach the top 5% or 1% of income earners during their working lives.

Since incomes and wealth are volatile across many people's lifetimes, society might be better off if policymakers focused on the unfortunate people destined to remain near the bottom of the income and wealth distributions. The twenty-four-year-old college graduate with an income currently in the bottom 50% of the income distribution will probably move up the distribution in the near future; there's not much reason to worry about this person. The people without college degrees or skills or with disabilities impairing their ability to earn good salaries are the ones we should worry about.

The views and opinions expressed are those of the author and do not imply endorsement by the University of Northern Iowa.


David Surdam

David Surdam

David Surdam received his Ph.D. in Economics from the University of Chicago. His dissertation, "Northern Naval Superiority and the Economics of the American Civil War," was supervised by Nobel-Prize Winner, Robert Fogel. Professor Surdam has taught at the University of Chicago, Northwestern University, Loyola University of Chicago, and the University of Oregon.

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Submitted by Faisal Yasin on
The 3 suggestions stunned me for a moment. It's interesting to read this article which is a few years old and comparing it to what is happening now with the introduction of the "wealth tax' idea. I totally agree with focusing on those at the bottom. Only a few programs and tax credits are helpful for low-income earners and these programs are not enough. The recovery after the recession made the people at the top even richer now with the 11 years of economic expansion and until now there have been no concrete steps to narrow the gap. I believe having a small tax for redistributing wealth might be a good idea, but whether it's effective or not is yet to be seen. (Depending on what happens with the elections).