Isabel B. Berg
School Without Walls Senior High School
1st Place, District of Columbia
Income Inequality and the Three E’s:
A Fair Shot For All Americans
I am fortunate to attend one of the most diverse high schools in the District of Columbia: roughly a quarter of students qualifies for free or reduced lunch, and 73% of the student body is non-white. However, last year our school sent every senior to college, and nearly every student tested proficient on our standardized tests. My school is far less segregated, racially and economically, than any other school I have attended. We are all very different, but we still go on to live similar lives: going to college, being hired at high-income jobs, and giving back to our communities. Places like my school create a more equal society. This is so important at this time in our country, where income inequality is growing at an increasingly fast rate.
Income inequality was not always a growing issue in the United States. Between World War II and the late 1970s, income consistently rose among all groups, but especially among the lowest income group, resulting in decreasing income inequality. Since the late 1970’s, however, the top 5 percent of Americans’ income has risen 72.7%, while the lowest 5 percent’s income has fallen. These statistics sound alarming, particularly when you consider that income inequality brings down the general economic status of a country; however, we can still recover. The United States can tackle this growing income disparity through use of the Three E’s: education, economic policy, and equal opportunity.
Potentially the most important of the Three E’s is education. Between 1915 and 1975, a period in which income inequality was decreasing, the college completion rate quadrupled. Since then, as the trend of increasing equity has reversed, the completion rate has stagnated. The symmetry between accessibility of higher education and equality of American citizens is no accident. As education levels rise, so does average income, while unemployment falls drastically. An effective education system gives students a relatively equal shot at prosperity and success.
Several DC schools illustrate these concepts. School Without Walls is the second most diverse high school in DC and the most high-performing. There is also very high income diversity, and students attend from all across the city. This means that the school is a melting pot of the city, but remains a high performing school where every graduate attends college. Walls shows that with good teachers and an effective administration, students from all socioeconomic backgrounds who have attended prior schools of differing quality can succeed in the school system and attend college. In fact, it shows that good teachers are the single most important aspect of education.
Another example is the Hospitality High charter school in DC. This school focuses on preparing students for jobs in the hospitality industry, and has placed 50% of their students in hospitality jobs in DC. It is partnered with the Hotel Association of Washington, DC, and uses their resources to help students succeed in the hospitality industry. While Hospitality High also focusses on college prep, and has sent about three quarters of their students to college over the years, it is a good example of a profession-based education in which local business owners participate in the education of the communities they serve. The participation of the community in students’ education is very important—not all change needs to come from government and policy.
Education is quite possibly the most important factor in income equity, and its availability and quality should be as high as possible. Through high teacher performance and community participation, the education system can improve and income inequality will decrease.
The second of the Three E’s is economic policy. Policies, especially concerning taxation, can be a powerful tool to combat income inequality by redistributing income and raising funds for social programs that support those in need. The countries with the lowest levels of income inequality in 2008 – Switzerland, Belgium, Denmark, Sweden, and Finland – all have low shares of pre-tax income for the top 1% of the population, ranging from 4.5% in Sweden to 10.5% in Switzerland. In contrast, the top 1% in the US earns 18% of the taxable income. While the socialist policies of these countries are unrealistic for the US, the basic principles of income redistribution and government-funded social protections can be implemented here as well.
Income redistribution works. In all countries surveyed by the Organization for Economic Cooperation and Development, including the US, income inequality after taxes averaged about 25% lower than before taxation. Through the use of deductions, credits, and progressive tax rates (those that tax higher incomes at higher rates), tax policy can effectively redistribute income, and can be a major force for promoting income equality.
However, since the mid-20th century, tax rates for the wealthy have decreased. According to the Congressional Research Service, “[a]nalysis … suggests the reduction in the top tax rates have had little association with … growth. However, the top tax rate reductions appear to be associated with the increasing concentration of income at the top of the income distribution.” Lower tax rates for the rich do not increase growth, they increase disparity. Progressive taxation to spread income around is extremely important element for the fight against income inequality.
Progressive taxation would also strengthen our social protections, including Medicare, Medicaid and Social Security. These programs help people through extremely expensive situations: Social Security provides benefits to retired workers, enabling people to use less of their income saving for retirement and allowing retirees to stay out of poverty, Medicare provides health insurance for these retirees, and Medicaid provides health insurance for those in poverty. These services are literal lifesavers for many of society’s most vulnerable people. Taxes also pay for “income security” programs, such as unemployment insurance, which allows people to stay out of poverty while looking for work; food programs, which ensure that families and individuals receive basic nutrition; and housing assistance, which reduces homelessness. Finally, a significant amount of this tax is spent on education, one of the Three E’s and a major factor in income inequality.
Economic policy is very important in fighting income inequality, and should be positioned to help mobility among the American people. Through progressive taxation, which provides more federal social protections, America can reduce and reverse its growing income inequality.
The last of the Three E’s is equal opportunity. America is known as the land of opportunity, and in order to give all citizens an equal shot it must live up to that name. In fact, “policies that foster the integration of immigrants and fight all forms of discrimination reduce inequality.” As a third-generation American, this is an extremely important issue to me. When my great-grandparents came to America, they opened their own business, a barbershop. They wanted to work, and give themselves and their children a better life by their own labor. This ability to achieve, which is the story of so many immigrants both then and today, is the basic American dream. It makes very little sense to restrict people’s ability to do that and give back to their communities, creating jobs and fulfilling needs.
One of the ways equal opportunity is needed to reduce income disparity is by protecting people who are discriminated against. The commonly stated fact that a woman makes only 80 cents for a man’s dollar is still true, despite the fact that, on average, women have higher qualifications than men. Another example of prejudice-based inequality is that directed at transgender people. Forty-seven percent of transgender people have not been hired, been fired, or been refused a promotion because they are transgender, and transgender people are in poverty at a rate over twice the national average. These are both prime examples of groups of people unable to gain mobility because of something beyond their control, a basic cause of income inequality.
Another way to reduce income disparity through is make a safer environment for workers. The OECD says that “arrangements that strengthen trade unions also tend to reduce labour [sic] earnings inequality by ensuring a more equal distribution of earnings.” Unionizing allows all workers to receive a relatively equal share, and while there can be negative impacts, the benefits outweigh them.
All people should be able to advance and get good work, regardless of any kind of social classification. Also, all people should be able to work in jobs which pay a living wage and have safe working conditions. Without protections to ensure this occurs, people can be caught in poverty.
Income equality enables the human resources—people—of a country to reach their full potential, causing growth in the economy; it enables more people to save and invest money, creating a more sustainable, larger economy; and it reduces the likelihood of class tension and instability. The United States can tackle growing income disparity through investment in the Three E’s: education, economic policy, and equal opportunity. Not only will these decrease income inequality, but inequality in all forms, creating a more cohesive society.
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