The Economic Empowerment Series

Part IV
6 Ideas to Bridge the Gap of Economic Inequality

Never before in our country has economic empowerment in minority communities been more vital.

But in order to be empowered financially, it is important that we develop a well-thought-out approach to economic freedom. It will not happen overnight. It takes time, patience, and understanding. 

With that in mind, there are moves that can be made in order to bridge the gap of economic inequality in America. 

Let’s take a look at a few of the steps that could help us achieve that goal.

One of America’s defining ideals is the idea that opportunity is available to all, regardless of where one starts on the economic ladder. However, Federal Reserve data confirms that wealth and income inequality in the U.S. is accelerating.

The Federal Reserve’s 2013 Survey of Consumer Finances show that the top 3% own 54.4% of America’s wealth, an increase of almost 45% since 1989. The bottom 90% own only 24.7% of wealth, which is a drop of 33.2% over the same time period.

Similarly, the share of total income for the top 3% of families rose when compared to 2010, but the bottom 90% of families saw their share of total income decline.

So, what are some ideas that we can research to close this gap? The Othering and Belonging institute at UC Berkeley has laid out 6 actions worth thinking about:

  • Increase the minimum wage.

    Research shows that higher wages for the lowest-paid workers has the potential to help nearly 4.6 million people out of poverty and add approximately $2 billion to the nation’s overall real income. Additionally, increasing the minimum wage does not hurt employment, nor does it negatively affect economic growth.

  • Expand the earned income tax.

    In recent years, the EITC has been shown to have a positive impact on families, lifting roughly 4.7 million children above the poverty line on an annual basis. Increases in the EITC can pull more children out of poverty while providing more economic support for the working poor, especially single parents entering the workforce.

  • Build assets for working families.

    Policies that encourage higher savings rates and lower the cost of building assets for working and middle class households can provide better economic security for struggling families. New programs that automatically enroll workers in retirement plans and provide a savings credit or a federal match for retirement savings accounts could help lower-income households build wealth. Access to fair, low-cost financial services and home ownership are also important pathways to wealth.

  • Invest in education.

    Differences in early education and school quality are the most important components contributing to persistent inequality across generations. Investments in education, beginning in early childhood with programs like Head Start and Universal Pre-K, can increase economic mobility, contribute to increased productivity and decrease inequality.

  • Make the tax code more progressive.

    It is a great irony that tax rates for those at the top have been declining even as their share of income and wealth has increased dramatically. The data show we have created bad tax policy by giving capital gains — profits from the sale of property or investments — special privileges in our country’s tax code; privileges that give investment income more value than actual work. Capital gains tax rates must be adjusted so that they are in line with income tax rates. Savings incentives structured as refundable tax credits, which treat every dollar saved equally, can provide equal benefits for lower-income families.

  • End residential segregation.

    Higher levels of racial residential segregation within a metropolitan region are strongly correlated with significantly reduced levels of intergenerational upward mobility for all residents of that area. Segregation by income, particularly the isolation of low-income households, also correlates with significantly reduced levels of upward mobility. Eliminating residential segregation by income and race can boost economic mobility for all.

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