Summary
The article by Leonhardt addresses the topic of earnings inequality. The author poses a question about the place of the upper-middle-class Americans in the national economy. Currently, there exist tow viewpoints about the distribution of wealth in the US. The first approach states that people whose income places them between the wealthiest 1% and the middle- and lower-class citizens are closer to the latter group than to the former (Leonhardt). According to this view, upper-middle-class workers face similar problems, including high medical costs, student loan debt, slowly growing incomes, and others. Therefore, only the wealthiest people in the country benefit from the current economic system.
The other side of the debate believes that the upper-middle-class does not encounter the same struggles as 90% of the population (middle- and lower-class groups) (Leonhardt). In contrast, these people enjoy higher wages, better education, stable marriages, and better quality of life. Leonhardt points out that the supporters of this ideology name the upper-middle class the modern “aristocracy” of the US. Thus, this segment of Americans is closer to the richest people in the country.
Leonhardt, however, introduces a third viewpoint – the country should separate people into three income groups to consider income inequality. The first population is the top 1%, the richest people in the US. The second group is 90% of Americans who belong to middle and lower classes. Finally, the upper-middle-class is the third sector that includes the remaining 9%. The author urges this particular group to consider the struggles of the bottom 90% and demonstrates that politicians (2020 Democratic candidates, in particular) are starting to see this divide as a reason for new economic policies. Finally, Leonhardt proposes a new taxing system – tax cuts for the bottom 90%, tax increases for the top 1%, and standard tax rates for the upper-middle-class Americans.
Discussion
In the article, Leonhardt relies on the Lorenz curve to showcase the distribution of wealth and inequality in people’s incomes. According to Borjas, this model shows the cumulative share of incomes of different household groups (286). Moreover, Leonhardt utilizes the 90-10 wage gap to showcase the differences between the income rates of Americans. Finally, the journalist bases his arguments on the trends in earnings increases among the classes. The use of multiple instruments demonstrates that the author has a good grasp on which of the economic models should be considered when discussing income inequality.
Leonhardt bases his argument about a new system of taxation on the flaws of using the Lorenz curve and 90-10 wage gap alone. If he were to use these models, while discarding the discrepancy in people’s income growth speeds, his theory of three income groups would not have a foundation. Leonhardt shows that the earnings of the wealthiest people in the US have increased substantially in the last three to four decades, while the upper-middle-, middle-, and lower-classes did not encounter the same change. As an outcome, one can see that historical and contemporary measures of earnings inequality are as valuable as the static calculation provided by the Lorenz curve.
It would be beneficial for Leonhardt to provide specific numbers to demonstrate the rates and which the disparity between the richest and the poorest populations increase. While the author mentions that the bottom 90% earn much less than the top 1%, the use of a 50-10 wage gap could provide more insight into the differences between people of the upper-middle class and Americans who have to use anti-poverty services. These calculations would corroborate Leonhardt’s argument for separate tax rates for the classes since the difference between the 9.9% and the bottom 50% is likely significant.
Works Cited
Borjas, George J. Labor Economics. 7th ed., McGraw-Hill Education, 2015.
Leonhardt, David. “How the Upper Middle Class Is Really Doing.”The New York Times. 2019, Web.