Reducing Income Inequality

How Much?…The extreme income (and other) inequalities in the United States and the world are not inevitable. However, effects to address income inequality must confront ideologies justifying inequality as the natural outcome of individual differences in skills, talent, and effort, ignoring structural causes. Some analysts have suggested that the poorest deciles could receive a larger share of income and much improved life prospects without seriously diminishing the life prospects of the wealthiest 10 or 20%.

While reducing income inequality in the United States might reduce overall GDP growth, it could find justification from liberal conceptions of justice if it resulted in sustainable improvements in major indicators of the well-being, such as the health, educational, and employment prospects of the less-advantaged part of the population. So long as basic human rights are respected, social policies that bring the least advantaged up to a minimum level of income and other goods should be more acceptable to impartial persons than the alternatives that benefit the better off while hurting those who are worst off.

Defenders of current levels of income inequality must show that some more-fundamental moral norm, such as a libertarian right to private property, takes precedence over the right to a level of income security and opportunity. Or they must show that any policies designed to reduce inequality will reduce efficiency and total income that the share for the least advantaged would be smaller that what it is currently.


Policies to address income inequality can focus narrowly on individual skills, opportunities and aspirations or may focus more broadly on altering the social, political and economic structures that create and maintain income inequality.

Policies That Indirectly Reduce Income Inequality

Income distribution is affected by patterns of taxation and ownership. Overall income inequality is affected by policies that provide public goods, such as health care and education. Wealth redistribution through steeper inheritance taxes, promotion of broader ownership, and socialization or redistribution of capital and land equally all to citizens are ways to reduce income inequality indirectly, as they will equalize the unearned income that derives freom ownership of wealth. Enforcement of affirmative action programs and educational institutions and policies such as government-subsidized childcare that enable people to enter the labor market should also affect income inequality facilitating greater access to higher income jobs. Globally, debt forgiveness and reform of trade agreements so they do more to benefit the least inequality, averting a race to the bottom.

Policies that DIRECTLY Reduce Income Inequality

Income inequality can be reduced DIRECTLY by decreasing the incomes of the poorest. Policies focusing on the latter include increasing employment or wages and transferring income. The range of employment-related policies includes strengthening collective bargaining rights, full employment schemes, living wage policies, stronger minimum wage laws, and wage subsidies. Direct income transfer policies include traditional means-tested and conditional cash welfare payments. There is also renewed interest in unconditional transfers such as a negative income tax and non-means tested universal basic income.

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