Income Inequality

Students will utilize the Structured Academic Controversy method to explore the issue of income inequality in America. Through reading and civil discourse, a clear understanding of the concept and its causes will emerge. In addition, students will realize that while the existence of the problem is broadly embraced, people disagree on a remedy. Students will gradually construct their own opinions as they uncover compelling arguments on both sides of the debate.

Essential Question

How can policy makers close the increasing gap between the richest Americans and all others through an expanding economy in a way that benefits all?

Income inequality in the U.S. is on the rise. While many believe something should be done to remedy the problem, the great division is in the prescription for a remedy. One point of contention is in how wealthy people are cast in our society. Is greed the dominant trait among them? Or, as Bill Gates describes, are there three kinds of rich people: the value creator, philanthropist, and serial consumer?

Bill and Melinda Gates will give away half of their fortune in their lifetimes and J.K. Rowling became one of the richest people in the world by creating a lot of happiness. Should all wealthy be treated equally? A bigger disagreement results with the discussion of solutions. Some people advocate for a more progressive tax code and an increase of the minimum wage to $15 an hour. Others see these suggestions as stifling job killers that will send even more opportunity overseas.

Should the federal government invest more in infrastructure and clean energy projects to create quality jobs that can’t be outsourced? Or should the federal government’s role be reduced by removing unwieldy regulations to allow citizens an equal opportunity in their lives? The depth of this issue in our society is hard to calculate when so many citizens still cling to their faith in the American ladder of opportunity. But, 77 percent of Americans with investible assets of $1 million or more cited the "increasing income gap between poor and wealthy Americans" as a top economic concern, according to a new study from Morgan Stanley. Clearly, that view warrants serious energy toward a compromise solution.
 

• Describe the meaning of income inequality, its causes and impact.
• Discern between the reality of income inequality and the misperceptions that many people hold.
• Analyze the contrasting opinions on how to solve income inequality.
   

• Activity 1: A link to the reading, The Smartphone Have-Nots , for each student. This should be assigned the day before to prepare for the lesson. 
• Slides 1-17 (PPT or PDF)
• A copy of Activity 2 for each student
• Student readings for one half of the class:
  • Activity 3A, "Can We Fix Income Inequality?"
  • Activity 3B, "US Wealth Gap a Bigger Problem than Growth: Harvard Survey"  
• Student reading for the other half of the class:
  • Activity 4A, "Bill Gates' Solution to Income Equality"
  • Activity 4B, "Conservative Women Propose a Solution to Income Inequality: Marriage"  

1. Ask the students to read The Smartphone Have-Nots article the night before this lesson will be presented. Indicate that this will provide them with some of the background necessary to succeed and that they will need to recall the information in the act of completing tasks in the next two days.
    
2. Following the homework assignment, assess their understanding of the subject, based on the Smartphone Have-Nots article:
   1. The period in American history from 1900-1978 is labeled by economists as The Great Compression. What do they mean by this and what were the conditions that made it possible? (A period of broad economic growth across all income levels where each generation did better than the preceding one. The causes listed include high progressive taxation, an increase in the social safety net – Social Security, the G.I. Bill – and strong unions that won benefits for the working class).
       
   2. What has happened to income distribution and this shared prosperity from 1979 on? (“The Great Divergence” where the bottom 80% of American households have experienced falling incomes, the next 19% modest gains, and the top 1% stratospheric gains in income.)
       
   3. What arguments are presented in the reading as causes for “The Great Divergence”? (Government deregulation to cut prices, a weakening of unions and worker safety nets, the advent of technological change which eliminated many middle class jobs while enhancing high paying professions, and no plan in place to help displaced workers transition into more desirable occupations).
       
3. Tell the students that the class will participate in a debate-style activity to explore solutions to the problem of income inequality in the U.S. Assign each student one of two roles: An advocate for corrective government solutions involving significant intervention from the federal government to solve the problem or a supporter of preventative solutions where the government peels away its redistributive influence and instead provides equal opportunity for people to succeed. Pair up classmates with the same role assignment and have them sit together during the first phase of the presentation.
    
4. Distribute a copy of Activity 2, The Structured Academic Controversy Capture Sheet, to each student. Tell them that they will use this template to gather evidence from different sources to build an argument supporting their position. As instructed on the sheet, students should highlight their assigned position. Have them read instruction #2 on Activity 1 and fill in the boxes as they proceed. Students will gather their information from the power point as well as the readings distributed as part of the activity. Have students recall from the reading the night before what evidence was presented that supported their case.
    
5. Display Slide 2. Expand the students' understanding of income by recognizing sources that are not from work. Tell the students that income can come from capital gains earned from investments (a significant source for the wealthy) and government transfers like social security and welfare programs (a support for the working class), for example. Disposable income is sometimes called “take-home pay” but it is any income available after taxes are paid.
    
6. Display Slide 3. Students may recognize the concept of income inequality through the phrases “gap between the rich and the poor”, “the haves and the have nots”, or the “shrinking middle class.” Any way it is cited, there is general consensus that the problem of inequality exists. Describe to the students that the lowest fifth is the poorest 20% of households and the highest fifth is the richest 20% of households. The table shows the percentage of total income that each fifth receives. The table illustrates the widening gap that has occurred over time.
    
7. Display Slide 4. Students will be introduced to one of the most widely used measurements of income inequality, the Gini (pronounced like Jeanie) Coefficient or Index. A “1” Gini value describes a country where one household has all of the wealth and all others have none (total concentration). A “0” Gini value indicates that every household has the same income as everyone else (total equality). Therefore, the higher the number, the more concentrated income is in the hands of a few households. The graphic provided indicates that the U.S. has been moving in that direction since 1970.
    
8. Display Slide 5. Students will notice that the countries listed and compared to the U.S. have two Gini values separated by a virgule. The first number indicates a Gini coefficient for the level of income inequality before any taxes are taken out of incomes or government transfers are appropriated to those eligible. Tell the students that one of the primary roles of government is to use its power to tax and spend to redistribute income. This can be achieved by a progressive income tax (take proportionally more as a household income increases) and revenue providing programs to elevate those with inadequate incomes (means-tested programs and Social Security).

   The second Gini value indicates income inequality levels after the application of government policy. For all countries, the values have fallen, because countries tend to tax the rich more and redistribute benefits to the poor. Note to the students that compared to America’s peers, our position of inequality has become worse. Point out that the U.S. went from being the 10th most unequal country in the OECD to the 2nd most unequal (OECD is the Organization for Economic Co-operation and Development). The only country more unequal than the U.S. in the OECD is Chile. Ask the students what these facts imply about the United States’ government policies relative to those in other OECD countries? The U.S does not redistribute income through taxation or government assistance as much as other OECD countries.
    

9. Display Slide 6. Students will discover the strain many perceive to be placed on a society under the weight of income inequality. Generally, it can block the poor from helping themselves and lead the rich to use their leverage to maintain their status.
    
10. Display Slide 7. Though there are numerous factors behind income inequality, it is commonly believed that the inconsistent nature of our education system and the increasing unaffordability of a college degree contribute to this inequality. In addition, the rapid integration of technology into the workplace and the maturation of our economy to a post-industrial phase have eliminated many good middle class jobs. Ask the students, based on their reading the previous night, how has the way our economy defines its citizens changed since 1979? (Possible answers include; while the rights of workers and their income were protected during the 1900-1978 period, the economy now looks upon people as consumers and has done a great deal to roll back the costly protections for workers that used to exist to provide more choice and lower prices).
     
11. Display Slide 8. The table suggests that most politicians recognize the presence of income inequality, but there is no carryover when it comes to solutions. Democrats and Republicans are divided when it comes to government-initiated solutions and the imposition of more progressive taxation. Ask your students what is the basis for the divergent positions on government’s role and taxation between people affiliated with the two major parties? (Possible answers include that a fundamental difference in these two elements has framed the parties for the last fifty years. Democrats generally believe that there is a role for government in ironing out the inequities in our society while Republicans believe in the spirit of the individual and the reduction of dependence on government, allowing people to solve their own problems).
     
12. Display Slide 9. A strong majority of Americans cling to the belief that a Horatio Alger story is available to all Americans if they work hard. Ask the students what belief is associated with the U.S. about opportunity for people born in this country or those who arrive on our shores? (Possible answers are that the U.S. is the land of opportunity and anyone who works hard can be successful, the streets are thought to be paved with gold so immigrants do make great sacrifices to enter the U.S.) As the slide indicates, climbing out of the lower quintiles of the economy has become very difficult. This is creating intergenerational struggles that increase the challenges. Tell students that the problem of immobility seems most acute in urban areas where economic conditions segregate income classes, isolating the poorest from quality schools and services. The problem is greatly concentrated in the southeast U.S. and upper mid-west (http://www.equality-of-opportunity.org/ ). Meanwhile, the glue keeping the wealthy in the top quintiles is becoming increasingly binding. The U.S. is becoming a less economically mobile society compared to our peers world-wide.
     
13. Display Slide 10. Tell the students that the result of the growing economic inequality and the intergenerational immobility is that basic pieces of the American Dream are becoming increasingly out of reach. A house, car, and a college education have been bid up so significantly in price that they exclude vast numbers of Americans from participating. Declining wages result in the inability to save for even the most basic emergencies.
     
14. Display Slide 11. In the case of economic mobility, the U.S. has some unique characteristics separating it from its peers that make the challenges a little easier to understand. Ask the students what they believe to be important building blocks necessary for a successful life in the U.S.? (Possible answers include a strong family, education, a career, religious faith, making good choices). Tell the students the U.S. has a far more heterogeneous population than many of our peers which has led to levels of institutional bias that create obstacles for opportunity. Many people grow up in single parent homes and our incarceration level is one of the highest in the world. These elements tend to place a young person at a far more distant starting line than those in more stable circumstances. The majority of good public schools are in communities that are unaffordable for many Americans. College has become a financial burden that many can’t bear or at least requires sacrifices that end up burying young people in debt. This segregation of society has left many unable to gather the resources necessary to achieve. Meanwhile, the income and social safety net that used to protect workers and redistribute income has eroded badly.
     
15. Slide 12 provides two ways of reducing income inequality. The first column labeled “Correcting Inequality” gives examples – there are others – of how to reduce inequality of income after it has happened. These include taxation that reduces the incomes of the rich and programs that help the poor. The second column provides solutions that emphasize ways to ensure that income inequality is less likely to occur in the first place, again, there are other examples. These solutions focus on helping people compete fairly in the market by providing basic education, health, and infrastructure to increase worker productivity. In addition rules ensure that competition is fair and people are treated equally.
     
16. The next four slides (13-16) represent the two major political party’s plans for tackling income inequality. Tell students they should pay close attention to these slides when gathering content to argue the position they have been assigned. The information collected from these slides should be summarized in the first box in Activity 2. Display Slide 13 and then 14. Tell students that this is the most recent set of solutions presented by the Democratic Party at this year’s convention in Philadelphia. Point out the level of federal government involvement in creating jobs through public works programs, a realignment of the tax code, raising minimum wage and fighting discrimination where it exists. In addition, have the students note the creation of educational opportunities and development, and a rethinking of trade policy with the American worker in mind.
     
17. Display Slide 15 and then 16. Tell students that this is the most recent set of solutions presented by the Republican Party at this year’s convention in Cleveland. Point out the emphasis on getting government and its regulations out of the way to enable Americans to have more choice and incentivize investment. In addition, tighter immigration measures to limit unfair competition from undocumented workers and strengthening the family unit are presented as a remedy for poverty.
     
18. At this point, indicate to the students that in the next period they will begin the remaining procedures in the Structured Academic Controversy activity. Tell them that this will involve discourse with classmates advocating different opinions. An air of mutual respect and civility should be maintained at all times. Display Slide 17 and keep it on the screen throughout. They should bring the activity back to class the next time they meet.

Period 2

1. Have students sit with their partners again, Assign Activity 3A and 3B to each student playing the role of public solution advocate and Activity 4A and 4B to each student serving as a supporter of rolling back the regulatory obstacles that keep individuals from finding solutions. Have them read the articles and use the bottom two boxes of the table on pages 1 and 2 of Activity 2 to organize the evidence from the articles favoring their position.
    
2. Give the students 10 minutes to finish the table in Activity 2. When the students have completed the table, have each pair turn to page 2 and complete section 3 by working with their partner to draw a consensus of the pair’s position. Give the students 10 minutes to come up with their consensus.
    
3. After the pairs have prepared a consensus statement, form as many groups of four as possible with two advocates of both points of view in each group. Rearrange seating so different pairs can face each other for deliberation. Each student should have his/her copy of Activity 2 for the remainder of the process.
    
4. Everyone should now move to section 4 of Activity 2 and read the instructions. Have the groups decide the order and then each pair will present their position while the opponents listen attentively. The listening pair should write down details of that position in section 4 presented by the opponent. If there are questions to be posed after positions have been offered, they should be written down as well. Each pair should be given the opportunity to present and the opponents the opportunity to question. Again, the tone should always remain respectful. Give the students 10 minutes to present their opinions and ask their questions.
    
5. Tell the students once the presentation of positions is complete, the groups should move on to section 5. Have all the students read the instructions. Tell the students that strict dedication to their roles should be set aside and the opposing pairs should now work toward finding common ground between the positions. Have the four students discuss openly where they agree and where they disagree and each student should record this discovery in Activity 2. The assignment will not be complete until each group of four has constructed a consensus position that is agreeable universally.

1. Ask the students to respond to the final question on Activity 2. Ask the students how their opinion evolved regarding the issues of income inequality and the solutions from the initial reading the night before through the power point presentation and deliberation. (Answers will vary, but at a minimum, some probably went from no opinion to having an opinion.)
    
2. Ask students how their future lives might be impacted if income inequality is not addressed promptly? (Possible answers might be the inability to pursue the standard of living enjoyed by their parents, difficulty in finding quality jobs, an exorbitant amount of debt throughout life, greater tension in society between classes, a reduction in America’s standing worldwide. Or, some students may suggest that they will do well in the economy, and so are not as concerned with addressing inequality.)
    

Extension activity not available.

As a final exercise, have students respond to this question in paragraph form: What is a more effective method to address inequality – fix inequality after it occurs or enact policies that help people get an equal chance to earn their way in life? Thoughtfully explain your opinion. (Answers will vary. Some will suggest that because equal opportunity cannot exist, redistribution of income after the fact is inevitable. Some will suggest that providing equal opportunity is the fairest way of addressing the issue and provides the best market incentives.)