The article analyzes the effect of government policies on the middle-class income. There are some policies that the government had laid down to ensure that the real income of individual workers in the United States of America has gone up. These policies that were introduced by the Obama administration had very little effect on the middle class (Barro 2). The article, therefore, details the role of politics in economic growth and the effect of economic growth of the middle class.
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In the economy, jobs provided by the government are limited. It is the private sector that controls the job market in the country. Therefore, the policies set by the government on minimum wage have to be rechecked by the private employers. Considering this fact, private employers usually pay higher than the government-recommended amount (Barro 3). If the recommendation were meant to address the plight of employees, in general, the middle-class workers would not be affected. It is only through hard work that will lead to their improved salaries as private investors are mostly revenue-oriented. Therefore, as the profit increases, the amount paid to the worker’s increases.
Policies that have been developed by President Obama have very little effect on the middle-class economy. For example, the policies on taxation have been viewed as to reduce the middle-class tax burden by a small margin (Barro 4). In fact, the economist argues that Obama’s tax policy favors the lower class than the middle class. Considering this fact, the political administration is seen as not focused on the majority of the United States of America’s biggest population.
Some measures of production are seen as worthwhile in eradicating the middle-class economy as the Obama policies. The reduction of the cost of production may be favorable to the middle class in some ways. The best explanation that has been given is that the reduced factors of production such as tax levied on capital and fuel prices lead to a lower cost of production. The goods produced at a lower cost usually have an advantage over those produced elsewhere at a much higher cost. Since consumers have choices, they will go for cheap goods (Barro 5). The result of this offer is a high sales volume that translates to higher profits. High profits made by private firms, then lead to increased salaries for the middle-class families.
Secondly, when goods produced are offered for sale at a lower cost, the members of the family in the middle-class economy will spend less of their income. Their purchasing power is increased, and therefore they can buy more goods and services than when the commodities offered for sale are at higher prices. Assuming that their level of consumption is constant, the families will have a high percentage of their income made for savings. In economics, we always assume that savings are directly proportional to the investment (Barro 6). Therefore, the higher the savings, the greater the investment that the middle class makes. The resulting figure will be a higher economic growth for the middle-class economies.
Government policies are meant to improve the citizens’ standards of living. The government usually seeks to alleviate the poverty of her population. Obama’s policies have greatly been criticized as they focus on one group, the lower class. It is important to know that the status quo is real in our society. Efforts need to be made in lessening the gap between the poor and the rich. The purpose of Obama’s policies from the economic point of view is to alleviate poverty from the lower class. When this approach succeeds, then the United States will be the best place to live in the entire universe.
Barro, Josh. “What Is ‘Middle-Class Economics’?” 2015. New York Times. Web.