Economic Paper - Admission/Application Essay Example

Income inequality Karl Marx, in his speeches and writings, drew attention to material understanding of society by highly criticizing capitalism. He highlighted capitalism as a system that breeds a bourgeois and a proletariat class. The former class owns production materials and capitals. Since the production owners underpay the proletariat class, they make supernormal profits at the expense of the welfare of working class. This causes a perpetual income gap. As centuries advanced, however, structures changed and promised hope to a working class who would then rise to riches.

Recent research and opinions, however, have drawn attention to rising income-inequality gap. Indeed, there is a glaring and growing income-inequality gaps that poses several socio-economic and political implications for the future generations. A report by OECD summarizes what underlies the income-inequality problem. To begin with, it reports that the developed nations, such as the US, have larger income gaps than those of developing nations (Fletcher 1). A surging disparity in wages is a major cause for this problem.

This occurs as the technologically adept workers attain huge salaries and wages while the less-skilled workers receive low pay. It is crucial to highlight that technological progress has created an indispensable skilled workforce that firms highly incentivize to retain. Besides, a surge in foreign direct investment and a lenient regulatory regime has weakened workers’ protection. This leads to a high wage premium for high-skill financial jobs, but limited pay for the workers at the lower part of the chain.

This study confronts the assumption that economic growth automatically bestows benefits to the disadvantaged. For instance, the OECD report highlighted that the richest tenth’s average income, of the OECD countries, is almost nine times of the least poor tenth (Fletcher 1). This is a serious issue in the US, since several reports have highlighted its high-income inequality gap (Sparshott1). For instance, most researches present that the income gap in the US has risen by over 20 percent since 1980.

In 2008, the average yearly income of the top 10 percent of Americans was 15 times higher than the lowest 10 percent (Fletcher 1). Major world bodies, such as the IMF, have warned the US that her rising income inequality is jeopardizing global growth. The implications, however, are worse than as stated by the IMF. This is because income inequality has weighty socio-political implications. To begin with, it enables a class of few people to govern policies that affect the rest of the population.

Thomas Piketty, a French economist, stated that income inequality is not a self-correcting phenomenon. Without access to quality education, the poor class remains in perpetual poverty as the rich use them to accumulate more profits. Significant researches attest to the fact that there are rising income-inequality gaps in the developed countries. This is a crucial issue in the US, whose poor class is increasingly expanding. The recent class of highly skilled workers has helped create an economic situation whereby firms pay massive wages to the few skilled employees, but pay lower wages to the lowly skilled workers.

In turn, high-income gaps worsen the welfare of the poor who are at the mercy of the materially endowed affluent class. This creates a cycle of exploitation, as the poor do not attain the adequate mobility to move out of poverty. Works citedFletcher, Michael. “OECD report cites rising income inequality.” The Washington Post December 5, 2011. Web. June 23, 2014. Sparshott, Jeffrey. “Wealthiest Households Accounted for 80% of Postrecession Rise in Incomes.” The Wall Street Journal April 17, 2014. Web. June 23, 2014.