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Approach to income inequality should stem from values, says professor
"When it comes to our income, there is a vast discrepancy," says Tassos Malliaris, Walter F. Mullady senior professor and the economics department chair. As we work to lessen income inequality, "values and beliefs must precede economic decision making."
Malliaris discussed the differences between income and wealth inequality and how policy shapes this inequity in the latest season of Q Talks Podcast.
Income inequality is easier to tackle than wealth inequality because it looks at how much income a person earns by being employed, while wealth refers to how much people have accumulated over the course of their lives, says Malliaris.
Below are three insights from the discussion "How Does Monetary Policy Impact Income Inequality?" You can listen to the full podcast on Apple Podcasts or Spotify.
Values precede economic decisions
Trust and social justice are important values in an equitable economy, says Malliaris.
"Particularly for us as a Jesuit school, we are constantly reminded that a nation, to do well and to prosper, it needs values. And social justice is an important value," says Malliaris.
When we value social justice, everyone feels they are important, valuable members of society and there is trust that they will be supported.
"Trust is important and trust is the result of the social values that come from the cohesiveness of society playing an important role," says Malliaris.
Societies have existed that value working for others and cherish the opportunity to give and share, but recreating and enforcing those systems is a challenge. Malliaris argues that using values and beliefs to guide economic decision making is a good place to start.
"It's tough because it forces you. If you say, 'Do I work for me or do I work for somebody else?' And the trust is, for instance, why is teachign exciting? If I have an idea and I give it to you, I do not lose it," says Malliaris.
"But it economics, if we take it from one and take it to the other, the person then says, 'What if that person doesn't appreciate it and I get hurt?' Unless you have a reason to celebrate the gift that you give, then it breaks down."
Income inequality has many causes
A variety of factors contribute to income inequality in the United States, says Malliaris. Some include:
- Education: People with a higher level of education tend to have significantly higher income. Someone with a high school degree has limited options compared to someone with a great deal of education, such as a post-graduate degree.
- Economy: Some types of jobs are more vulnerable in times of economic downturn, such as service industry positions during the COVID-19 pandemic.
- Globalization: As the global market grows, manufacturing and other businesses have relocated to other countries, taking jobs with them.
- Technology: Technological advances and automation have the potential to displace workers.
People are affected by these conditions depending on their profession, with a complex web of factors coming into play when discussing income inequality.
"What really matters is providing to young men and women equal opportunity so that they all receive a good education and good training and prepare themselves for good positions in the future," says Malliaris.
Monetary policy impacts unemployment
In August 2020, the Federal Reserve made a critical policy change. For more than 2- years, the emphasis has been on keeping inflation low. Now, the Federal Reserve is indicating a new emphasis on issues of unemployment.
The new Federal Reserve policies are aimed at generating more jobs and the government is creating the conditions to better equip future generations with the education they need. As a result, "the future of income inequality may not really disappear but we could moderate it to the point where on average, we do better than we are currently experiencing," says Malliaris.
With these policy changes, unemployment rates can drop and more workers can have access to well-paying, rewarding positions.
"This is of course very exciting for a place like Loyola," says Malliaris. "We participate both in terms of training students in the University, but we also believe that we should provide opportunities in terms of what we do at Arrupe College, which is a remarkable institution. And if it could be duplicated in many more universities, you could see easily how... that could really help things."