Inequality in America: Does Redistribution Work?
A recent piece from the “Democracy in America” blog of the Economist suggests two ideas about inequality in America: that it could be much worse, and that the nation’s social programs could do more to lower the inequality gap by moving away from a low-income focus and embracing a universal view.
According to a graph created by Janet Cornick, an economist working with the CUNY research center, the United States has one of the highest income inequality rates in the developed world, 0.42 on the Gini coefficient, which is a scale that measures the income inequality of a given nation. (“The metric at play is a number between 0 and 1 known as the Gini coefficient. In a hypothetical country with a coefficient of 0, everyone has exactly the same income, while a nation with a coefficient of 1.0 is home to one fat cat who takes everything while everyone else earns nil.”) That said, although America’s rating would be even higher, 0.57, if its social programs and taxes were removed, “on that count America doesn’t fare badly in comparison to other OECD countries.”
From the Economist:
“At 0.57, America is neck-and-neck with Spain and every Scandinavian nation, and less unequal than Britain, Greece and Ireland. But the American taxation and welfare state clips only 0.15 off of the pre-tax-and-transfer Gini coefficient, while more aggressively egalitarian countries slice off 0.20 (Luxembourg, Norway), 0.24 (Germany, the Netherlands, Sweden) or 0.28 (Ireland).”
So while it’s true that America’s social programs do reduce economic inequality, the piece suggests that the U.S. could do more to reduce its income gap by focusing on a universal application of its existing programs.
Again, from the Economist:
“…pouring less money into low-income health programs in favor of universal social policies like national health insurance seems to be the recipe for greater equality. With more all-embracing programmes like Social Security, buy-in is broader and the social benefits are more stable.“
But perhaps most interesting is the firestorm of comments this piece has provoked, including this one: “This is a terrible, terrible idea. Also note that Europe is far poorer than we are!”