The effect of income inequality impacts every American

Johnathan Knowles

Johnathan Knowles

Inequality has existed in many different forms, whether it be social inequality, racial inequality, or economic inequality. While the United States has made great strides to ensure that all ethnicities and races are represented and treated equally, this idea of pure equality is nothing more than a fiction given that a large portion of systematic disparities, related to race and ethnicity, that exist today are remnants of our darker past.

Despite people of color being largely equal in many respects, such as no longer being considered a partial citizen and having the right to vote in elections, it does not necessarily mean that the problem of equality has been resolved. For example, one of the most talked about issues in regards to minority rights today is the income gap between Hispanics/African Americans/Native Americans and Whites in America.

African Americans and Hispanics, on average, earn much less than their White counterparts, thus leading us to ask many tough questions in the process. For example, most people, when discussing this income gap, talk about the policy aspect of it and often say “how can we mitigate or at least narrow the gap in income between Whites and people of color?” What we don’t often think of is the effects of relative income equality.

Think about this for just a second. What if Hispanics, African-Americans, and other minority groups suddenly earned the same amount of income or salary that the typical White family makes on a yearly basis? Do you ever think of the potential economic benefits that would come to fruition as a result of this change? What many people don’t realize is that it is to the benefit of everybody, including you, your friends, your family, companies, and etc. to ensure that income equality is a priority.

PolicyLink/PERE conducted an economic analysis of a hypothetical situation where all races were paid the same amount of money and the results are extremely positive. They found that the entire GDP of the United States would increase by a staggering 14%, meaning that the GDP would increase by a factor of $2.1 trillion. Ponder on these findings for just a moment and understand the potential effects that it could spell for the economy as a whole.

Okay, so maybe this study is a little idealistic and a bit simplistic, but it illustrates the fact that there is such a divide between the income Whites earn and the income that people of color earn in this day and age. For one, this study doesn’t take into account all of the money that corporations would have to spend in order to train workers to obtain workplace skills nor does it take into account the investments in education that would have to be implemented in order for people to become qualified for higher paying positions. What this study also doesn’t do is lay out a realistic framework for how long it would take for such a large shift in income earned by the population.

Another massive implication of creating complete income equality would mean that a large portion of the low wage jobs that exist would effectively have to be eliminated. Considering the fact that more whites, nominally, benefit from lower paying jobs, this would mean many Whites would end up potentially losing their jobs and benefits. While on the other hand African Americans and Hispanics would gain an advantage in the job market. So in a way, this is a zero-sum game. We have to reconcile the fact that in order for formative change to take place, there will inevitably be parties that will be negatively affected. At the same time, we must also realize and weigh the cost-benefit relationship. Helping millions of people crawl out of the hole of poverty and reach the same level of equality as the rest of the country.

But, in the end, evidence shows that when there are efforts to increase equality among races, everybody tends to benefit. Take a look at the chart below.

Credit: Justin Scoggins and Manuel Pastor (PERE/PolicyLink)

It shows that during the 1960s, a time when the Civil Rights movement was beginning to take shape, whites, and blacks began to see a marketable increase in their incomes all across the board. At the same time, however, the income inequality between both cross-sections began to decrease, illustrating that whenever there is efforts increase equality they do work and they can benefit all parties, not just minorities or people of color.

We are then forced into a corner, in the sense that we must address the residual inequalities that exist and create ways or initiatives that will help to minimize and perhaps eliminate them. The question is how? For example, there are different types of discriminations that take place that prevent people from obtaining jobs. They are classified as passive and active discrimination practices. Passive discrimination is usually when jobs still hold onto their bias for rejecting a certain applicant by their name or race, but not actually deliberate with their intent. Active discrimination goes a little bit farther, such as an employer withholding pay or paying an employee less than another employee because of his/her’s ethnicity or religion.

With most businesses nowadays, usually the type of discrimination that is practiced is the passive type. Justin Scoggins, an author who helped conduct the PolicyLink study cited above, said that sometimes inequities are “baked” into the system and that, even if unintentional, it can put certain demographics at a disadvantage. Think of it this way. Whites and Asians typically are the highest earners in the country which normally correlates with a high level of education. In order to attain a tertiary education, one must have the necessary capital to fund such a venture. African Americans and Hispanics, who on average don’t earn quite as much as their more privileged counterparts, will subsequently have a tougher path to achieve the same goals in life.

So, more than often companies will expect their employees to be adept and well qualified, but the main issue is that reaching this ‘stage’ is much more difficult for people of color than it is for Whites. Unfortunately, the system is set up to be this way and it will never change. At the same time, it is not unreasonable for a company to prefer educated, well-qualified candidates. After all, you want competent people in the workplace. What we can do, however, is come together as a society and work harder to ensure that all races and ethnicities are able to have access to the same opportunities, like education, that everybody else enjoys.

Inequality is a serious issue that has plagued this country for the better part of the last 200 years. In actuality, inequality can hold with it a variety of different meanings. The most prevalent type of inequality that exists today, income inequality, is probably one of the last real obstacles that need to be addressed today, aside from reforming the criminal justice and education system. Income inequality is to the detriment of society as it is holding back the true potential of the economy. Ensuring that all races are paid equally would actually increase our GDP, accelerate the growth of the economy, and give us a higher quality of life. The first steps that need to be taken before any of this can occur, however, is that we have an honest discussion about why and how we can realistically fix this problem. Only after this occurs can we begin to move forward.