Want to Increase Economic Growth? Give a Dollar to a Poor Person
The Economic Case For Income Equality
Income Inequality On the Rise
The overall state of the economy in the U.S and other developed countries has been improving in recent years. In 2017 U.S GDP grew by 2.6%, unemployment was down, businesses are posting record profits, and many of the stock indices such as the S&P 500 have been pushing all-time highs.
The unemployment rate in the U.S was 3.9% in April, the lowest it has been in decades. Historically, significant drops in unemployment are followed by increases in wages. This is due to the supply and demand principles of economics: When the unemployment rate is low, companies have a smaller pool of workers (limited labour supply) to choose from to fill vacant positions. This creates competition between employers and typically leads to upward pressure on wages as employers must outbid their competitors to hire the desired employee.
With unemployment dropping below 3.9%, history would tell us that wages must also be rising significantly, but they aren’t. According to a report by the Economic Policy Institute, the median wage increase was only 0.2% in 2017, not even enough to cover a Costco membership for many workers.
