The World Economic Forum 2014
The World Economic Forum is an independent international organization and a foundation that does not work for profit, which organizes international economic forums and multilateral summits in its home country of Switzerland, the Alpine town of Davos. The World Economic Forum converges together a large group of participants, about 2,500 individuals to discuss different pressing issues facing the world economic system. Among the major participants at this Forum, yearly, are influential business leaders, political leaders and delegations, international intellectual leaders and the leaders of influential international organizations, such as the United Nations, the European Union. On January this year (2014), the forum discussed some of the important pressing economic issues, deliberating upon income inequalities in different countries, wealth and power (Pigman 12-16).
One of the controversies deliberated at the Summit this year was the rising income inequalities in some world economies, especially in the backdrop of the recent years economic meltdown, credit crunch and world economic crises. Furthermore, a report by Oxfam International in 2013 observed that the 85 richest individuals on the entire globe possess the same amount of wealth and resources as does 50% of the world’s population. Such reports point to the massive income inequalities as well as resource inequalities in different countries of the world leading to aforementioned discussions at the World Economic Forum 2014. There were different camps arguing for different positions at the summit this year, with some calling for more action to reduce these levels of income inequalities, as well as the detrimental use of wealth and power by business leaders and rich powerful individuals to distribute income and resource in order to curb disparities. Another group was arguing that despite the rising levels of income inequalities and resources disparities, the general global level of poverty has gone down compared to a decade or two ago. In my view, the camp arguing that income inequalities need to be addressed are more pragmatic and sensitive to the plight of the world’s poor and exploited workers (Sala-i-Martin).
Sources of Income Inequality
One of the major sources of income inequalities in any world economy is the wage disparities for different types of workers. In most of the developing and underdeveloped countries of the world, most of the populations earn about one dollar per day, translating to approximately 10 cents per hour. This, when compared to some of the industrialized countries where some of the lowest earning workers receive over $10 per hour, points directly to one of the biggest sources of income inequalities. Therefore, low minimum wages and salaries is one of the biggest sources of income inequalities and pay disparities (Lambert 12).
Another major source of income inequalities and wage disparities in different countries and economies is the corporate greed that plagues most institutions and organizations that employ different types of workers. The fact that many governments and state authorities as well as private business enterprises and organizations, such as multinational corporations, always refuse to increase the minimum wages and salaries of their employees, particularly the unskilled workers is one of the major reasons as to why the global income inequality rates are rapidly increasing. Multinational corporations, for instance, have a very bad reputation, particularly in the developing and the underdeveloped countries of the world for their corporate greed and payment of low wages and salaries to the many unskilled workers toiling day and night in their factories and manufacturing plants to produce their goods, services and products. This provides a very huge avenue for income inequalities and wage disparities to thrive (Bornstein 23-28).
Modern Science and Technology
The technological advancements brought about by modern science and research can also be an attributive source of income inequalities and wage disparities, especially in most of the industrialized countries where different business enterprises, government, as well as multinational organizations are increasingly using machinated technology to design and manufacture their goods, services and products. Industries requiring lots of labor, which are labor intensive and that are time intensive too, such as the manufacturing industry, e.g. the production of automobiles and vehicles, are using modern science and technology to replace human workers who previously occupied these job positions. As such, many unskilled and skilled workers have found themselves to be highly expendable, and as such, cannot even negotiate for better salaries. This has left them earning very low income as compared to the owners and managers of these business enterprises (Bornstein 29-33).
Taxation and Weakened Labor Unions
The levels of taxation in an economy, particularly the one with regressive tax policies, always leave the poor and unskilled workers being heavily taxed from the little money they are earning. This, coupled with the weakened role of many labor unions in different countries, has left workers with virtually no or very weak bargaining power, thereby serving to promote income inequality all over the world (Hollenbeck).
Solutions to Income Inequality
First, different employment stakeholders such as governments and private business enterprises/companies need to increase the minimum wages of their workers, as this rectify wage disparities considerably, thereby reducing income inequalities (Lambert 20). Second, corporate societies and organizations such as multinational companies, banks and other influential companies need to reform their systems and operations, to mitigate the detrimental effects of corporate greed. Governments should also crack down on corporate greed from private business enterprises (Page and Jacobs 24-34).
Third, private Business Enterprises, as well as governments and state authorities, need to incorporate modern technology with human labor and skill, so that the two can be mutually inclusive and not exclusive. This will enable workers to retain their value and also any hope of better salaries and wages (Bornstein 33-36).
Fourth, different countries and governments need to reform their tax laws and regulations through progressive tax systems to ensure that the already disadvantaged are not heavily taxed. They should also provide labor unions with democratic space to strengthen them and let them do their work freely (Gilens 27-34).
The above-proposed solutions will ensure that the rapid rising levels of income inequalities and wage disparities will be drastically reduced. Such a development will in turn foster a stronger and more stable international economic system, thereby reducing the possibilities of excessive state borrowing and other practices that have led to different economic crises in recent years such as the Eurozone crisis, the 2008 economic meltdown and credit crunch.
U.S. Federal Minimum Wage Increase
Over the past few years, the United States Federal Government has been contemplating an economic decision of raising the federal minimum wage of employees in the United States of America from $7.25 to $ 10.10 for each hour that an employee works. During the United States State of The Union Address in January 2014, President Obama went on to fire up the United States Congress so that they would vote for the increasing of the federal minimum wage. The President later signed an executive order to that effect, thereby providing momentum to the process of increasing the aforesaid minimum wage. The decision to increase the American federal minimum wage has a number of far-reaching repercussions to the American citizens and taxpayers, workers and the federal government at large. This particular economic decision has its both economic advantages as well as disadvantages (Matthews).
Advantages of Increasing the Federal Minimum Wage
First, one of the major economic advantages of raising the American federal minimum wage is that it would provide a direct increase in the wages and salaries of approximately 28 million workers working in the different federal economy sectors of the gigantic American economy. A federal minimum wage increase will also ensure that there is a direct increase in the wages and salaries of around 19 million workers, who come from various types of families and households (Matthews).
The second advantage that the federal minimum wage increase will bring to the American economy is that it will provide workers under different federal contracts with more purchasing power, thereby helping to improve their standards of living and consequently, their lives (Page & Jacobs 37-39).
The third advantage is that a higher minimum wage has the unique potential of attracting more and more labor into federal job contracts. Moreover, the federal minimum wage increase will also improve the value of minimum wages, particularly to workers interested in federal contracts. This is because the previous minimum wage of $7.25 per hour has always been looked down upon by different potential federal workers, thereby leading to a shortage, especially of skilled labor personnel. Therefore, an increase in the federal minimum wage will restore the value of minimum wages for federal job contracts (Gilens 29).
Fourth, increasing the federal minimum wage will also provide the U.S. Federal government with the chance to collect more taxes from the different workers under federal contracts. For every cent of the federal minimum wage increase, the U.S. revenue collectors will be able to collect tax. Therefore, the move will allow the U.S. Federal government to increase its tax collection (Salam 23).
Disadvantages of Increasing the Federal Minimum Wage
First, there are fears from some influential economists that raising the federal minimum wage might result in unemployment for a considerable amount of federal workers. Only time will prove this right or wrong (Matthews 30). Second, some economists also argue that increasing the federal minimum wage is less cost effective in tackling income inequalities and poverty compared to other incentives such as tax credits (“Economists Debate Benefits, Drawbacks to Raising Minimum Wage”).
Third, raising the federal minimum wage also carries the threat of increased taxation from the federal authorities, with the federal workers bearing the brunt (Gilens 33).
In conclusion, the advantages, both to the workers having federal contracts in the United States of America as well as the U.S. Federal government far outweigh the disadvantages of such an economic well-being move. In my view, the federal minimum wage should be raised, as it will produce far reaching positive outcomes for the struggling federal workers and it will help to improve their lives and their living standard.