Economic Inequality - Mitigating Factors

Mitigating Factors

Countries with a left-leaning legislature have lower levels of inequality. Many factors constrain economic inequality—they may be divided into two classes: government sponsored, and market driven. The relative merits and effectiveness of each approach is a subject of debate.

Typical government initiatives to reduce economic inequality include:

• Public education: increasing the supply of skilled labor and reducing income inequality due to education differentials.
• Progressive taxation: the rich are taxed proportionally more than the poor, reducing the amount of income inequality in society.
• Minimum wage legislation: raising the income of the poorest workers
• Nationalization or subsidization of products: providing goods and services that everyone needs cheaply or freely (such as food, healthcare, and housing), governments can effectively raise the purchasing power of the poorer members of society.
• Unionization supportive legislation such as the Wagner Act.

These provisions may lower inequality, but have sometimes resulted in increased economic inequality (as in the Soviet Union, where the distribution of these government benefits was controlled by a privileged class). Political scientists have argued that public policy controlled by organizations of the wealthy have steadily eroded economic equality in the US since the 1970s.

Market forces outside of government intervention that can reduce economic inequality include:

• propensity to spend: with rising wealth & income, a person must spend more. In an extreme example, if one person owned everything, they would immediately need to hire people to maintain their properties, thus reducing the wealth concentration.
• Unionization: although not a market force, per se, labor organizations may reduce inequality by negotiating standard pay rates (though probably increasing unemployment). As union power has declined, and performance related pay has become more widespread, economic inequality has mirrored productive inequality.