How I think we can solve income inequality

Income inequality is one of the major global issues talked about today. It is the bane of the working class’s existence, and, something which a great number of the 1% consecrate fervently. The two countries where this Brobdingnagian inequality is coming most to light, are the United Kingdom and the United States of America. As a result, there will not be that many figures in this article; simply theories, which I think may help solve the problem. If you do not think that income inequality is a massive issue already, take a look at these figures: the income of the bottom earners worldwide increases by only 1.4% annually, however, the income of the richest 1% increases by 2% in the same time period.

In the United States of America, income inequality increased the most among all the developed nations – the richest 1% growing by 275%, while wages of the poor grew by only 20% in 30 years. These statistics show that income inequality is not a forgotten relic of the past, nor something which we can put off nonchalantly. It is something we must fix now, and below is how I think we should do it. I would just like to thank Robert Reich before I start this, as his steps to reducing the inequality have been greatly inspirational and beneficial to my thoughts, although I do not concur with all of his ideologies.

My first solution is to raise the minimum wage, and after having done this, to index it with inflation. This will ensure that your average Joe will be able to cope with the rapidly increasing cost of living, while hopefully also having a bit of disposable income to boot. Indexing the minimum wage to inflation is an essential component to this solution, as we cannot let this simply be a Band-Aid on a broken leg; that is, we cannot let the problem lie after simply increasing the minimum wage. The solution must be an ongoing and progressive one, and indexing the minimum wage to inflation certainly ticks all of those boxes.

In addition to this, we need to make high quality childcare available to the majority of the population. As of now, high quality childcare simply costs too much for the majority of the working class to afford; and as such, inequality is simply getting worse, as the children of the rich are getting better services, and in turn, a higher likelihood of social and cognitive development, which means that they are more likely to take up the high paying executive positions than the others, whose parents were perhaps not so lucky. Unequal starting points only mean that the finishing points will be unequal as well, and we must address this problem by giving everyone a uniform starting point, meaning that people win the race based on merit, rather than a never-ending cycle of rich breeding rich. Although I do acknowledge that this problem can never be completely fixed, this solution will definitely help the problem, making sure that more people can help their children get on in life from the very beginning.

Finally, my last step to solve income inequality is to introduce fairer, more progressive taxes, meaning that we save billions of pounds a year through tax avoidance at the top. It is objectively not fair and certainly not progressive to have companies like Starbucks paying only £8.6 million in tax over the course of 14 years. The money saved from closing down tax loopholes on wealthy individuals and large corporations could be used in improving the quality of state education in the UK, or improving the quality of childcare from the ages of 1 to 5, as I mentioned above.

Moreover, many of these corporations also cause environmental degradation, so in effect, you would be killing two birds with one stone like this, reducing the gargantuan gap between rich and poor while promoting the environment. I do not in any way suggest that these steps are the only ways to reduce income inequality, nor that they will definitely work, but as of now, in my opinion at least, they certainly are some of the best options.

Why fossil fuel divestment will not work

Climate change activists have had enough. The continuing rise of energy companies, and, in turn, fossil fuels, has angered them to no end and thus, they have started a new project: divestment. Divestment is the action or process of selling off subsidiary business interests or investments, in this case of energy companies. They want to do this to stop climate change progressing at the alarming rate which it is doing as of now.

How will divesting help this? Well, the activists think that a large sell off in the shares of these energy companies will cause them to rethink their actions for fear of further repercussions, namely a drop in their share price. This all looks very well and good on paper, but in practice, it simply would not work for a number of reasons, the first of which being that investors will quickly snap up any chances to buy the shares at the newly reduced share price. Due to the mechanisation of today’s society and therefore trading as a whole, this process would take around 5 minutes at most as prices went down and then up, a momentary shudder on the otherwise rigid share price.

Although this process may raise a small sense of alarm in the “big figures” of the energy companies, they would just treat it as a small price movement. Sellers outmatched buyers. Buyers levelled it. It’s as simple as that. There are far too many people in this world who could not give the slightest hoot about climate change, and who do care about buying at a reduced share price; buying low, as they say. Until a majority of the significant shareholding population will care enough about climate change to do something about it, a small number of firms divesting will do nothing at all.

However, I am all for seeing every possible scenario, so let’s say that divesting does work and Company X announced that it would not extract fossil fuels from its assets any more. The “big people” at Company X would be astute enough to aim to make some money back from this decision, and not just to sit on their losses. As such, they will simply sell their assets to Company Y, who is willing to extract from them. Now instead of the assets being split between Company X and Company Y, Company Y simply has all of them, and Company X has nothing. Apart from a significant amount of work to do for the company printers, nothing would have been achieved here, and we are not any closer to raising awareness about fossil fuels than we were before.

You could say that the awareness raised by Company X selling their assets to Company Y would be a good thing, however, in my opinion, this positive news would be offset by the negative news that Company Y has bought up yet more assets of fossil fuels. There would be no net gain for anyone and the cause would not be strengthened in any way. Don’t get me wrong, I am all for preventing climate change, it is a great evil of our society, however divestment is simply not the way to do that. It just wouldn’t work.

A few economic models to combat piracy

Firstly, I’m really sorry for not posting for almost two weeks, as I’ve been really busy with school and other commitments, and have just not found time to post here. However, although it is not going to get easier, I will try and post every week from now on

Piracy: the unauthorised use or reproduction of another’s work. It is one of the problems which plagues modern society like, well, the Plague. Movie producers, TV show producers, and countless others are trying to stop this seemingly uncontrollable wave of piracy from continuing. It is an inevitable and inescapable truth of the society which we live in that people want to get things for free. If you want proof of that, you just need to look at all the people falsely claiming benefits in the UK. As people get lazier through the mechanisation of society, they will, obviously, want more things free of charge. Piracy is a perfect way to sate this need, with programs, videos, even bootable discs from every corner of the world and any sort of producer imaginable available on these flagrant websites.

Below are some simple economic models that I have devised, which I think could help combat the rise of piracy in the world. In the interests of simplicity, I will limit these models to movies.

Firstly, the general consensus is that DVDs nowadays are far too expensive, and the opportunity cost of purchasing these DVDs is far too high for the average man, who does not have a dearth of disposable income. Of course, as they still want to satisfy their desire to watch the movie, they will look to alternate avenues to watch these movies. My proposed solution is to reduce the cost of these DVDs so that the opportunity cost will not remain so high, and more people will have the disposable income to buy the DVD, with a clear conscience. In order to accentuate my point, I will take an example.

The Wolf of Wall Street was the most pirated movie of 2014, and, in order to understand why, I searched its price on Amazon America from 2014, which turned out to be $26.99. Even with my relative inexperience in spending, I am quite sure that your average Joe would not want to fork out $26.99 to buy a DVD, which he can pirate in about an hour and watch, in full 1080p Blu-Ray HD. In 2014, what I think that they should have done is to cut down that price by about $10 to around $15.

Although these figures may not be entirely accurate, I think that they can be tweaked at any time, as it is the underlying principle that matters for the moment, not the figures. A price cut means that consumer demand would be stimulated, as they are able to watch the movie and have about $10 of disposable income to spend elsewhere, so everyone’s a winner, in a sense. This means that the amount of people turning to piracy as a result of having insufficient disposable income decreases, as they can now buy that movie, have some more disposable income, and have a clear conscience on top of that.

Although sometimes people just want something entirely for free, this would, in my opinion, reduce piracy and make sure that those movie producers have a little bit of extra money in their pockets.

The next model is based on people’s physical laziness, more than monetary laziness. In my opinion, people who pirate sometimes do so because they are not willing to go through the effort of going to the store, and purchasing a DVD, then driving back home. Who wants to do that in the 21st century?

Although the introduction of websites with shipping such as Amazon and eBay have changed this somewhat, they are still a harder choice to take than searching up a file to pirate. To combat this, what the movie producers could do is to create an online movie marketplace of sorts, which would render DVDs meaningless. Demand for DVDs has been decreasing over the years, as people just do not want a physical copy of something that they want anymore. It’s all virtual. Creating an online movie marketplace, with downloads similar to that of torrent clients such as µTorrent and the like, would mean that the physical hassle that people have to go to in order to purchase copies of a movie would be eradicated.

I understand wholly that services like Netflix exist, however a common complaint is that there is a rather limited choice of movies. An online movie marketplace ensures that you can get the movies that you want, whenever you want, at (hopefully!) the subsidised price that you want. Again, this would increase demand, as people do not have to go through the effort of actually purchasing material copies of movies in the form of DVDs, and it will take up less physical space in their house. The corporation will also have to go through less expenditure in order to produce all those DVDs, as there will be an infinite, unlimited number of copies of movies, so they do not have to cut into profits by increasing supply, as supply is infinite. It is a win-win situation again, as corporations get more money, the people get an easier alternative to buying DVDs, their disposable income increases, and piracy is reduced.

To me, these are the changes that need to be made in order to at least somewhat eradicate piracy, as in any modern business, you need to profit off consumer laziness by providing the path of least resistance in order to give them the easiest access to the goods and services that they want. Subsidised prices increase demand and put more money into the pockets of large corporations, and the people get an easy alternative to piracy, which will leave them with a clear conscience. Of course, piracy can never be completely nullified in this digitised age, but I think that this would be an effective and cost efficient way to combat this cancer to modern society.